|
 Since April 1, Morgan Stanley Wealth Management financial advisers
have seen their compensation cut by as much as 50 percent on sales
of new issues to clients who use the firm primarily to get
allocations of those securities. The severity of the pay cut varies,
but some top earners are seeing payouts cut by half. The new system
applies when more than 70 percent of the business from a client
comes from those deals.
Morgan Stanley is hoping that a drastic cut in this kind of
compensation will spur brokers to sell more products, such as mutual
funds, loans and financial planning services, to those clients,
according to several Morgan Stanley advisers.
At the same time, the bank is hoping the move could force clients
who want continued access to hot IPOs to put more of their assets
with the firm's wealth management business. Morgan Stanley has
underwritten the Facebook and Twitter IPOs and is also expected to
win the assignment for the forthcoming offering from Chinese
ecommerce giant Alibaba Group.
Morgan Stanley spokeswoman Christine Jockle confirmed the change in
the broker compensation policy. She said it was meant to ensure that
new offerings were distributed more broadly across the client base.
Archrival Merrill Lynch, a unit of Bank of America Corp <BAC.N>, has
not made similar changes to its compensation structure, a source
familiar with the matter said on Friday. Wall Street recruiters said
they think that only Morgan Stanley has made such a move among the
bigger brokers.
While the change at Morgan Stanley was detailed internally in
November in a lengthy document that outlined the wealth unit's 2014
compensation structure, some advisers realized it was happening only
after it was implemented and their pay checks dropped in recent
weeks according to several advisers.
The advisers who spoke with Reuters said many of the bank's roughly
16,426 financial advisers are now unhappy. They said the change
could repel clients who use the bank to get access to new issues.
Access to hot IPOs and new bond issues can also be make-or-break for
building new client relationships and maintaining existing ones.
[to top of second column] |
The average retail broker at Morgan Stanley typically gets no more
than a few hundred shares per client for popular IPOs that the firm
underwrites, said one of the advisers, who requested anonymity
because he did not want to be seen criticizing his own firm.
"I got 100 shares of Twitter for a guy when they went public, and
I'm sure he won't be happy if he wants something else and I tell him
it's not available," the adviser said. "It's not a good situation."
Morgan Stanley uses its retail brokerage in seeking to win stock and
bond underwriting assignments, saying the size of its sales force
gives it an advantage over Wall Street rivals. The bank was ranked
No. 1 for equity underwriting fees in the first quarter, according
to Thomson Reuters data.
At the same time, the bank is also trying to improve the profit
margins in its wealth management unit, which now accounts for about
40 percent of the company's revenue, looking at both increasing
assets under management and selling clients more products.
Morgan Stanley has been tweaking its incentive structure for
advisers the past few years to align with its business goals. The
2014 compensation policy, for example, also included bonuses for
making loans as well as incentives to brokers who could convince
clients to tell Morgan Stanley what assets they hold outside the
firm as that gives advisers the chance to pitch for them.
(Additional reporting by Jed Horowitz; editing by Paritosh Bansal
and Martin Howell)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
