The battle between the big wire-houses for wealth management business continues to force changes in how advisors operate.

Morgan Stanley is reportedly changing how it remunerates its brokers and prodding them to use new technology to squeeze more value from clients.

The firm said in a memorandum yesterday (source: Wall Street Journal, July 30, 2018) that it would reward advisors who use recently-launched financial planning tools that demonstrate where clients have money and how it’s spent. The memo was sent to Morgan Stanley’s roster of about 16,000 advisors, the report said.

Family Wealth Report has contacted the Wall Street firm for comment and may update this article in due course.

Along with rivals such as Morgan Stanley and UBS, Morgan Stanley wants to keep competitive and protect margins at a time when some of the big-name broker/dealers have seen teams quit to start on their own, often forming registered investment advisors. Some of this has been fuelled by a desire to become more independent. While it has hit some legal roadbumps, the Department of Labor Fiduciary Rule, which encourages a switch to fee-based advice and away from commission payments, is also putting pressure on the big-name B/D firms.

Another twist is that last year Morgan Stanley decided to walk away from a pan-industry “protocol”, established in 2004 by hundreds of firms, under which they agreed not to sue each other when teams of staff defected. UBS and Citigroup have also left the arrangement. Morgan Stanley had complained that the protocol was being abused.

Changed model
“A combination of advisers and technology will drive the future of financial advice,” a Morgan Stanley executive was quoted as saying yesterday.

With the changes effective next April 1, Morgan Stanley brokers will have several ways to earn more money, the report said. Executives said the highest producers -those bringing in at least $5 million a year in revenue - would be able to keep up to 58.5 per cent of the money they generate for the firm, up from 55.5 per cent, through a combination of using the new technology and hitting certain targets for new net assets acquired from clients.

The average Morgan Stanley adviser brings in about $1.1 million a year to the firm in revenue generated from clients.

A report by Cerulli Associates, an analytics firm, set out how the B/D landscape is changing and what some of the larger players are doing to stay competitive.

The compensation revamp at Morgan Stanley follows remuneration changes at rival Merrill Lynch.  

Separately, Wells Fargo, which has suffered a number of compliance mis-steps, is reportedly considering a shakeup to its wealth management arm although this publication understands that such moves will not affect its Abbot Downing business, which caters to the ultra-high net worth client segment.