Morgan Stanley to Move Forward with Tougher Grid Hurdles in October
After a six month delay in light of the coronavirus pandemic, Morgan Stanley is moving ahead with its plan to add tougher hurdles to advisors’ pay grid on October 1, according to two people familiar with the matter.
The firm, which in March delayed the original April 1 implementation date, confirmed to its 15,400 brokers in a memo in recent weeks that it will be going forward with the new grid as planned this fall, the sources said. The updated grid, which was first announced in November, will raise revenue hurdles by about 10% for brokers, who earn between 28% to 55.5% of what their customers pay.
The implementation of the grid change is another sign of the industry’s thawing as the market has rebounded from its March 23 low and as Morgan Stanley and other brokerage firms have been slowly rolling back some virus-related relief measures and reopening some branches outside major metro-area markets.
Morgan Stanley reopened 50 of its 590 branch offices in June and has continued to selectively allow more brokers back with additional safety measures.
The tougher grid also appears to signal Morgan Stanley’s confidence in its mostly remote sales force after it posted strong results that surpassed analyst expectations in the second quarter as revenue rose 6% year-over-year in the wealth business and advisors attracted 13% more assets in the quarter compared to last year.
Similarly, Edward Jones last week reported improvements in both revenue and profitability year-over-year in the second quarter and restored pay raises to employees and branch office administrators (although bans on overtime pay, travel and some hiring remained in effect).
Morgan Stanley and other brokerage firms had been raising the bar for 2020 as advisors’ revenue was steadily climbing during the 11-year bull market, but it and many of its peers pulled back as the virus spread.
UBS Wealth Management in May delayed for a second time a portion of its plan to impose tougher requirements for brokers on teams to earn higher payout rates and pushed back implementation three months to October 1. (The delay did not affect its own higher grid thresholds for individual brokers that took effect in January before the virus’ spread.)
Merrill Lynch in March cancelled its mid-year assessments to qualify for team payout incentives and doubled down on its compensation relief by reducing its account growth hurdle to three from four accounts that brokers had to open this year to avoid a 100 basis point payout reduction.
Merrill, however, has also eyed the potential for raising the account hurdles under its “growth grid” as conditions normalize.