Morgan Stanley Adjusts Compensation Plan for Financial Advisors

Morgan Stanley, renowned for its prominent wealth management division, has recently announced adjustments to its 2024 compensation plan. As a result, financial advisors may find themselves needing to put in extra effort to maintain their current pay levels. The modifications, which were shared with advisors today, pertain to the grid system that determines payouts.

In the realm of major brokerage firms, advisors typically receive a percentage of the revenue they generate. Higher revenue producers have the opportunity to climb the grid and earn a more substantial payout. Although the actual payouts will remain unchanged, falling between 28% and 55.5%, the new compensation plan will raise the revenue thresholds by approximately 10%.

To illustrate this change, consider the highest payout tier in the current plan. Advisors currently need to generate $5 million in revenue to qualify. Under the forthcoming plan, this threshold will increase to $5.5 million.

It is not uncommon for major brokerage firms to adjust their compensation plans annually, incorporating fresh bonuses or refining the structure. In fact, the most recent adjustment to thresholds at Morgan Stanley occurred in 2020. This year, however, the company has chosen to disclose its plan changes earlier than usual, aiming to provide advisors with ample time to adapt.

Announcement of Compensation Plan Changes

Morgan Stanley has recently announced early details of their upcoming compensation plan for the year 2024. The goal behind these changes is to equip advisors with the necessary tools, resources, and information to provide the best value to their clients. Vince Lumia, head of field management, emphasized that these adjustments are aimed at fostering growth and strengthening client relationships.

One significant modification to the compensation plan involves an increase in business development allowances. Additionally, an award program that previously rewarded lending growth will be discontinued. Instead, a higher payout on money market fund positions exceeding $50 million will be implemented. This adjustment acknowledges the influence of the current higher rate environment, which has prompted investors to seek out more lucrative options.

AdvisorHub, an industry news site, initially reported the intricate details of Morgan Stanley's compensation plan. It should be noted that other major brokerage firms, including Bank of America's Merrill Lynch, Wells Fargo, and UBS, have yet to disclose their compensation plan changes for the upcoming year.

Last year, Merrill Lynch notably raised revenue thresholds for its compensation grid, marking the first time such changes had been made since 2009.