Morgan Stanley Joins Rivals in Curbing Broker Recruiting
May 23 2017 - 2:34PM
Dow Jones News
By Michael Wursthorn
Morgan Stanley will curtail its recruiting of veteran brokers,
signaling that Wall Street is no longer willing to gorge on the
pricey practice of paying top-dollar to poach talent.
The New York firm told brokerage managers on Tuesday that it
would "significantly reduce experienced adviser recruiting" in an
effort to tamp down those costs, while spending more on supporting
existing brokers and investments in new technology, according to a
memo from wealth-management heads Shelley O'Connor and Andy
Saperstein that was viewed by The Wall Street Journal.
Morgan Stanley is the latest brokerage to say it wants to cut
back its recruitment activities, which usually involved paying
brokers six- or seven-figure signing bonuses, Wall Street's main
mechanism of attracting brokers, assets and revenue.
Such bonuses were structured as loans forgiven over as long as
eight or nine years, with brokers initially getting paid up to 150%
of the annual revenue they generated off fees and commissions. Such
deals usually included back-end portions that brokers would earn
after hitting certain asset and revenue targets over the life of
the deal -- an arrangement that had become problematic under new
retirement rules set to take effect next month since they could be
perceived as a conflict of interest. Brokers who changed firms
before the deal's term ended were usually forced to pay back a
remaining portion.
Executives had bemoaned the practice for years as costly and
called it a "zero-sum game" among the four main brokerages --
Merrill Lynch, Morgan Stanley, UBS Group AG and Wells Fargo &
Co. -- as they routinely traded brokers with one another. Still,
brokerage executives viewed it as a necessary pipeline for asset
and revenue growth.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
May 23, 2017 14:19 ET (18:19 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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