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Wirehouses, Regionals Pay a Premium for Growth

March 4, 2014

Big-firm financial advisors’ compensation in the coming year will more closely reflect how much they contribute to their employers’ growth, reports On Wall Street.

“We want to reward advisors who are growing,” is the rationale David Lessing, chief operating officer for “field management” with Morgan Stanley’s brokerage business, shares with the publication. “It’s really where we want to place our bets as a firm.”

Advisors who meet Morgan Stanley’s growth criteria — which apparently weren’t spelled out to On Wall Street — can pull in awards of up to 5% of revenue “on top of their core comp and a 25% increase in their business development allowance,” the magazine says. Bonuses are also in store for advisors who bring in more “net acquired assets” and those who do more lending.

Meanwhile, UBS’s U.S. brokerage wants to “empower” its advisors to “build” their businesses by stressing financial planning and encouraging the pursuit of the ultrawealthy. “In 2013 we saw that really worked and our financial planning fees doubled,” says the unit’s head, Jason Chandler. As a result, the firm is offering a 50% payout on planning fees of more than $1,000. And like Morgan Stanley, it’s upping this year’s expense allowance to help qualified advisors bring in new customers and make more of the relationships they already have.

Regionals are pushing for growth as well. Janney Montgomery Scott, a subsidiary of Horsham, Pa.-based Penn Mutual, offers advisors “who generate at least $550,000 in gross production” this year “and meet growth criteria … up to 5% of their annual gross production on top of their core compensation.” according to On Wall Street. Jerry Lombard, president of Janney’s private-client group, puts this growth-oriented compensation strategy in blunt terms. “We want our top FAs to enjoy well above average total compensation, and we’re OK with our below average [advisors] having some sort of mid-range to just below average compared with their peers at other firms.”

In addition to encouraging growth, these bigger payouts are meant to keep large-firm advisors from going independent, according to On Wall Street. And given Lombard’s message, they may equally be calculated to encourage slower-growth advisors to find new perches.

By Thomas Coyle
  • To read the On Wall Street article cited in this story, click here (free registration required).