Deferred comp is the new black for wirehouse payout grids

In just four short years, wirehouses are expecting a bumper crop of retention awards to expire.  It’s never too soon to be sure that the soon-to-be advisor free agents feel the tug of devotion — and unpaid deferred compensation.

In 2015, deferred compensation is the new black at the major wirehouses.

Technically speaking, grids were largely left in tact so that firms could claim to have merely altered compensation on the margins. But now comp is inarguably more backloaded, and therefore somewhat less valuable. And that’s not all.

  • UBS ended its 3% bonus on fee-based business and substituted a more broadly based Wealth Management Award that offers advisors the potential to earn a 6% bonus. That will be deferred for six years.
  • Morgan Stanley jacked up the deferred percentage of payouts by 1.5% to 2% for most advisors — vesting in four years for the stock component and eight years for the cash portion. Large producers who joined Morgan Stanley in the last few years and are still under contract will be the hardest hit.

Payout tweaks at major wirehouses are similar in that firms are rewarding the same set of advisor best practices:  acquisition of new client relationships, fee-based business and lending and other banking business.

Firms are aware that in the short-term they may lose some advisors. But preparing for January 2019, when the retention awards expire, is their end game. Wirehouses are betting that their bolstered deferred compensation dollars will convince more advisors to stay with the home team. Given the stratospheric levels of upfront bonuses offered by rival firms,  it’s hard to see how these new programs  will make much of a difference in stemming defections.

About Mark Elzweig

I am an executive search recruiter with an inside track on financial advisors, the asset management industry, and Wall Street. My work has appeared in numerous publications including On Wall Street,AdvisorOne, and Fund Fire. Journalists regularly seek me out, so you catch my bon mots in The Wall Street Journal, Research Magazine, Reuters, and more. You can follow me on Twitter @elzweig or you can reach me directly at 212-685-7070 or elzweig@elzweig.com.
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