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Industry Spotlight > Wirehouse Firms

Wirehouse Comp Plans for 2024: What's In, What's Out

By Jeff Berman

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What You Need to Know

  • Merrill Lynch Wealth Management is ending two controversial policies as part of its 2024 compensation plan.
  • Morgan Stanley Wealth Management says brokers must generate more revenue next year to maintain the same payouts as this year.
  • UBS is keeping its incentive grid largely unchanged and is introducing some growth incentives.

The three wirehouse firms that have disclosed their 2024 advisor compensation plans seem to be paying attention to advisors’ concerns over recent pay issues, industry consultants say.

The wirehouses “tried to layer in an element of listening to an advisor’s feedback and rolling back certain unpopular elements ([like] Merrill hair cutting brokerage commissions)” but fell “short of wholesale changes advisors were looking for,” according to Louis Diamond, president of Diamond Consultants, a recruiting firm.

For example, both Merrill Lynch and UBS “rolled back some unpopular polices that have helped fuel defections,” said executive search consultant Mark Elzweig, president of Mark Elzweig Co. At the same time, Morgan Stanley is the “only … wirehouse to monkey with their grid and raise payout hurdle rates,” he said.

Wells Fargo still hadn’t announced its 2024 advisor compensation or communicated its details as of Thursday.

Here are some of the key changes at Merrill, Morgan Stanley and UBS for 2024, and what the shifts mean for their advisors and the industry.

UBS

Jason Chandler, head of Global Wealth Management Americas at UBS, informed advisors about the firm’s 2024 Financial Advisor Compensation Plan last week, telling them in an internal document: “The principles this year remain the same — rewarding productivity, growth, and longevity.”

For 2024, the firm’s “incentive grid remains unchanged and we are introducing incentives to support our growth strategy,” Chandler said.

“Based on our key principles and your feedback, we are adding a new Client Growth Award and new incentives for engaging clients in banking services,” he explained. 

Under that new plan, advisors hired before Jan. 1, 2022, will be awarded 1% of the business they do for the 12 months ending Dec. 31, 2024, Chandler noted. Advisors, who number about 6,000 in the Americas, must also generate positive net new business (net new assets and net new lending) from Nov. 1, 2023, to Dec. 31, 2024. 

Morgan Stanley

In September, Morgan Stanley Wealth Management told its roughly 15,000 brokers that they must generate more revenue next year to maintain the same payouts as in 2023.

The firm’s 2024 pay plan will raise the production hurdles on brokers’ core compensation grid by about 10%. For example, brokers who generated $990,000-$1.1 million this year will have to produce $1.1 million-$1.2 million to earn the same revenue in 2024.

Brokers also need to reach $5.5 million in revenue, up from $5 million in 2023, to qualify for the highest payout. 

Payouts, meanwhile, continue to range between 28% and 55.5% of the fees and commissions brokers generate, based on where they fall in the firm’s 16 revenue bands. Next year’s change will affect about 33% of Morgan Stanley’s advisors, according to an AdvisorHub report.

Morgan Stanley also changed its small household policy to eliminate payouts for brokers with households that have less than $250,000 in assets — unless the accounts qualify for growth exemptions. Brokers will also get no credit for households that don’t grow by at least 5% and have $25,000 in new assets or liabilities in 2024.

Morgan Stanley will offer a few advisor-friendly concessions. For example, the budget for brokers’ business plan development costs will increase by 10%.

Merrill Lynch

Merrill Lynch Wealth Management said it was ending two controversial policies as part of its 2024 broker compensation plan.

First, the firm is dropping its five-year-old growth grid, which rewarded brokers for adding clients and accounts but penalized those who didn’t grow their businesses. Second, the company will end a policy introduced in 2023 that reduced brokers’ credit for transactions, hurting broker commissions.

Merrill is rolling out a new growth award that will pay up to 12 basis points on net flows of up to $50 million. To qualify, brokers must attract three new client households with more than $500,000 in assets each, as well as boost their clients’ prior-year total assets and liabilities by 7.5%, in 2024.  

Experts’ Reactions

The wirehouses have “gotten the message that it’s a super competitive marketplace for top producers with an ever expanding array of options,” Elzweig explained. “They need to show their advisors more continuity and simplicity in how payouts are determined.” 

“The smart play now is to continue to offer incentives for growth but to keep the hands-off grid levels,” he said. “Merrill scrapped its widely disliked growth grid which penalized advisors for not adding enough new households.”

He also predicted: “I don’t think that any other wirehouse will follow Morgan Stanley by chopping their grids.”

Meanwhile, Diamond pointed out: “A commonality amongst most of the new comp plans is firms recognizing that tying bonuses to net new households is a constructive way to incentivize advisors.”

This is, he explained in an email, “using more of the ‘carrot’ than the ‘stick,’ and data from Merrill and UBS likely shows that net new households acquired increased when they’ve had these elements.” 

“While advisors much prefer simple comp plans where they can be trusted to run their business the way they want, it’s clear advisors are competitive and respond to growth linked bonuses,” he explained.

“In the end, with all the new comp plans, some advisors benefit, most remain neutral and some are hit pretty hard. In the case of Merrill, larger producers who consistently hit the old growth grid are now penalized based on the new structure,” Diamond noted.

And, for compensation consultant Andy Tasnady, managing partner of Tasnady Associates, the main “theme” is that the wirehouses “still want to focus on more growth per advisor but will soften or not include at all corresponding penalties for lower performance year to year.”

The “biggest risk (and largest upside opportunity) for advisors’ total comp nowadays is the performance of the market,” Tasnady said. “With most sales credit now coming from assets under management fees, [a] market drop of 20% would mean [a] 20% comp total drop.”

(Credit: Bloomberg)

Jeff Berman

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