Morgan Stanley plans to hike the client asset minimums for its higher net worth Private Wealth Management unit from $2 million to $5 million, according to an internal memo spelling out the bank's 2021 compensation. The change will take effect in April 2021.
The wirehouse left unchanged its core compensation grid, said Vince Lumia, Morgan Stanley's head of field management, in the December 8 memo. The firm did create new hurdles for financial advisory team members to qualify for their top-ranked member's rate of payout, which take effect in July 2021, the memo states.
"As you will see, there are very few changes for next year," Lumia wrote, adding that the wirehouse was largely keeping the status quo "even in the most challenging of times."
While the firm is raising the threshold for Private Wealth Management accounts to $5 million, new accounts will be exempt from that minimum for their first 12 months, according to the compensation plan.
There exceptions allowing advisors to get paid at the usual rate, even for accounts below the soon-to-be $5 million threshold. If an account has a financial plan and receives ongoing monitoring from the advisor, it would be exempted from the $5 million minimum and the advisor would get paid the usual rate, with no penalty, the company says. If an account is monitored but doesn't have a financial plan, then the advisor's normal full credit rate would drop to 10%, the company says.
Under the new qualification standard for teams to earn their top member's payout, those teams must meet one of three targets, according to the plan. They must have gained net new assets during the prior 12 months, had 10% of their clients sign up for a financial plan, or have three-quarters of their clients using Morgan Stanley's online portal and tools, the plan states.
The increase in account minimums for Private Wealth Management clients is significant, and a "pretty big raise," says Bill Willis, president and CEO of the Palos Verdes Estates, Calif.-based recruiting firm Willis Consulting. Private Wealth Management advisors who have clients whose assets don't meet the new minimums will have to either service them without getting paid, drop out of the unit, or find a workaround, Willis says.
The new threshold for teams to earn top-member payouts, however, "seems like a fairly low hurdle," says Willis. "Why would you just not put all your clients online? Isn't that where you want them to be?"
Editor's Note: This story was updated at 12:15 p.m. on Dec. 16, 2020, with additional information from Morgan Stanley regarding exceptions to the changes to the higher private wealth management account minimums.
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