EXCLUSIVE: Morgan Stanley Trims Recruiting Bonuses for High-end Brokers
Morgan Stanley Wealth Management has trimmed signing offers for higher-end producers, carrying out its late-spring announcement that it would “significantly reduce” its hiring of experienced advisers following a last-ditch recruiting spurt during the summer.
The firm, the biggest broker-dealer as measured by its 15,780 brokers, has reduced its signing bonus ceiling to around 250% of a veteran recruit’s trailing-12 month production from a multiple that had reached around 350% a year ago, according to outside recruiters and internal sources briefed on the new recruiting formula over the past few days.
Like many of its big-firm rivals, Morgan Stanley has been eager to end the brokerage industry’s expensive practice of “buying” new business through the zero-sum practice of recruiting big books of business by hiring top brokers and their teams. No firm wanted to risk being the first to make the decision, but have found shelter from the Department of Labor’s guidance late last year that bonuses tied to hitting future production goals would be a fiduciary standard violation.
Morgan Stanley’s stripped-down recruiting deal includes upfront cash of 150% of the fees and commissions that a top broker or team generates, plus another 100% of back-end bonuses paid in the form of “forgivable” loans that amortize over nine to 12 years. The sources emphasized that the top deals will apply only to so-called franchise players and that revenue generated from retirement accounts are not included in the trailing-12 base to comply with the DOL guidance.
A spokeswoman for Morgan Stanley confirmed the general outline of the program, saying the firm is still interested in hiring “franchise” teams as well “recruiting a diverse talent pool.” She declined to comment on specific hiring targets.
Both Morgan Stanley and Merrill Lynch have said that they hope to fill the production gaps left by departing brokers through hiring less experienced brokers or those that are entering into, or returning to, the wealth management business after taking time off for life events such as child-rearing. They also are focusing recruiting efforts on millennials with “digital” skills.
Recruiters said Morgan Stanley officials have not defined a “franchise” player who could qualify for a slimmed-down top deal, but estimate that they would likely be those generating revenue of $2.5 million in major markets, and somewhat lower in in less-affluent regions.
“It’s not as sweet as when franchise players could get 350% to 375%, but in this new world it may be enough,” said one recruiter, who declined to be named because he is working with Morgan Stanley.