Morgan Stanley Restricts Stock Plan Advice to Small Group of FAs
Morgan Stanley is restricting its servicing of executives’ corporate stock portfolios to fewer than 20 advisors, requiring some 30 others designated as “stock plan directors” to relinquish their titles.
As of August 1, the New York company will limit the business of working with individuals who have significant stock-and-option compensation plans to about eight teams that generate millions of dollars of revenue from stock-plan advice, according to brokers and Morgan Stanley executives familiar with the new policy.
The change follows Morgan Stanley’s $900 million purchase earlier this quarter of stock-plan administration firm Solium Capital, whose Shareworks software helps manage stock positions for about 1 million employees at 3,000 private and public companies.
The acquisition underscored Morgan Stanley’s strategy of deepening its use of workplace plans as a source of wealth management business, but raised questions as to how its advisors would compete for stock-plan clients and work with Solium’s salesforce, which specializes in small, often privately held companies.
“It makes sense to work with a smaller number of stock plan directors to supplement our new platform,” said a person familiar with the new restrictions, speaking on condition of anonymity. “With the new (Solium) hybrid model, we don’t need the same distribution force.”
To qualify as a stock plan director, advisors must meet three of four criteria:
- Produced $3 million of team revenue in the previous 12 months;
- Produced $1 million of team revenue solely from stock plan administration;
- Generated at least $2 million from stock plan clients’ investment activities;
- Manage and maintain 12 or more active stock plans.
Thirty-four advisers will lose their designations for failing to qualify, said one advisor affected by the change. Another person familiar with the plan said advisors who lose their stock plan titles can continue working with existing plan clients in wealth management areas outside of stock administration.
“They are not disappearing from the relationship,” the person said.
Morgan Stanley also is confident that few corporate executives and entrepreneurs will complain about losing advisor relationships. More than 80% of revenue generated from its stock-plan comes from eight stock-plan teams that will remain in the program, said people familiar with the program.
To assuage advisors who are forced out, Morgan Stanley expects to pay a transition fee for each account that moves to the remaining stock plan directors, according to one advisor. By yearend, Morgan Stanley will also have in place a referral fee for any advisor who gives stock-plan business to the elite group of directors, said another person familiar with the plan.
The stock plan business, which has been renamed Shareworks, is part of the firm’s broader “Morgan Stanley at Work” suite of products and services aimed at converting 401(k) plan participants to firm clients. The sector is run by Brian McDonald, a former Charles Schwab Corp. stock plan executive who joined Morgan Stanley 18 months ago. He reports to Jed Finn, chief operating officer of the wealth management division and newly named head of its “corporate and institutional solutions” group.
Morgan Stanley’s stock plan business prior to the Solium purchase administered positions for 1.5 million individuals at 320 mostly large companies. The combined businesses are expected to service more than 3,300 stock plan clients with 2.5 million participants, the company said.