Morgan Stanley Raises Hurdles for Brokers’ Compensation

  • Some said to face revenue threshold about 10% higher
  • Top of the sliding scale of $5 million remains unchanged

Morgan Stanley changed its compensation plan, forcing some of its brokers to generate more revenue to avoid a pay cut next year, according to a person with knowledge of the move.

Bonus levels on the firm’s compensation grid -- a sliding scale that determines the percentage of gross revenue a broker gets to keep -- will increase by about 10 percent, said the person, who asked not to be identified speaking about personnel matters. In one example, a broker must produce at least $242,000 in 2017 revenue to reach a 32 percent payout, up from $220,000 this year.

Chief Executive Officer James Gorman, 58, is leaning on the wealth-management division to help reach profitability targets. In January, Gorman said revenue growth and expense discipline in the business could increase pretax margins to as high as 25 percent in 2017, up from 22 percent in 2015. The New York-based company had 15,856 brokers as of Sept 30.

The grid, which rewards advisers with bigger percentages the more revenue they bring in, will be unchanged at the top threshold of $5 million, which results in payouts from 51.5 percent to 55.5 percent, depending on how long the broker has worked at Morgan Stanley. The firm last modified the grid in 2014, when thresholds for lower-producing financial advisers were increased by 10 percent, the person said.

AdvisorHub previously reported Morgan Stanley’s plans to change compensation.

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