The reality is that the wirehouses would prefer that individual advisers did not exist, so that they could put the commission side of the ledger into the profit column. While that is not going to happen, the firms are moving in that direction. Decreasing commissions, making it impossible to remove false U-5 filings, increased and defamatory BrokerCheck disclosures all have the effect of reducing broker mobility and advancement.
We see these issues every day in our practice - gimmicks to reduce compensation and to increase hurdles, increasing the use of the "zero compensation" for small account policy, bogus terminations in order to avoid bonus payments, or stealing profitable books of business, abusive partnership agreements, and false U-4 and U-5 disclosures. We continue to fight these abuses on behalf of our financial professional clients, but that is one fight at a time, and not a fight that every professional can afford to mount.
And there are the changes that cannot be economically challenges - because the cost to an individual professional is relatively small, but the benefit to the firm is in the millions of dollars. While by no means the worst offender, Morgan Stanley is the latest. It has announced its 2014 compensation plan. In the second amendment in three years following the Smith Barney acquisition, Morgan Stanley is raising revenue bands by 10% for advisors bringing in under $2.5 million. A $1 million producer, for example, would now have to make $1.1 million to attain the same 44% payout.
Fee based account payouts will be decreased by an ‘investment services fee’ of 5 basis points, or 0.05%, on assets held in fee-based accounts. The fee will apply to new money as of 2014. We expect to see that "fee" applied to all accounts by 2015.
Watch for a similar announcement from Wells, Merrill and UBS.
For more detail see Morgan Stanley Raises the Bar with 2014 Comp Plan
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The attorneys at Sallah Astarita & Cox include veteran securities litigators, former SEC Enforcement Attorneys and brokerage firm attorneys. We have decades of experience in securities employment matters, having represented hundreds of professionals for over 30 years. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.
