Morgan Stanley, the brokerage with the biggest corps of financial advisers, changed its wealth- management compensation plan to encourage brokers to increase revenue and allow them to buy discounted stock.
The 2013 program pays a bonus of 2 to 5 percentage points of revenue for advisers who bring in new assets and are in the top 40 percent in revenue growth, according to terms outlined in a summary obtained Thursday by Bloomberg News. That comes at the expense of a 2 percentage-point reduction in the revenue bonus paid to all brokers who generate at least $750,000.
Greg Fleming, president of Morgan Stanley’s wealth-management business, is seeking to control costs while avoiding defections and meet his target of a mid-teens pretax margin next year. Wealth-management employees typically have been paid a higher portion of revenue than colleagues in trading units because the brokerage business takes less risk and demands lower levels of capital.
'There remains a lot of pressure from a recruiting standpoint', Fleming, 49, said at a December 4th investor conference in response to a question about possible changes to pay structure. 'The existing system for compensation also works for shareholders'.
The changes don’t affect the so-called grid payout, usually the largest portion of a broker’s compensation, or the bonus based on tenure.
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