Morgan Stanley and Smith Barney gave details of their retention program to advisors late February 20. The program "awards" are being offered to about 6,500 of the 20,000 advisors in the joint venture as forgivable loans.
These veteran producers, who must have at least $500,000 in '08 sales, commissions and fees to be eligible for the program, represent about 80 percent of the combined venture's total revenue, according to two firms.
Top veteran producers with $1.75 in yearly sales can receive as much as $1.84 million through the program, while a producer bringing in $500,000 in yearly sales would get about $300,000.
And some newer producers (referred to as "Rising Stars") stand to gain from about $87,500 to nearly $225,000. News reports have estimated that the retention packages will total $2 billion to $3 billion.
The retention program will be paid to advisors in the form of nine-year "forgivable loans." Those advisors leaving either firm before the end of the nine-year period, will have to pay back the portion of the "loan" that has not yet matured or been amortized, a representative of Morgan Stanley explains.
For advisors who have been with either Morgan Stanley or Smith Barney for more than seven years, the program will distribute two "installments" as follows:
- Advisors with sales/commissions/fees – or gross dealer concessions (GDCs) – of $1.75 million in 2008 or higher will receive 75 percent of this amount in January 2010 and 30 percent, guaranteed, in January 2012.
- Advisors with GDCs of $1.0 million in 2008 or higher will receive 75 percent of this amount in January 2010 and 25 percent in January 2012, if they grow their GDCs 25 percent or more over the three-year period.
- Advisors with GDCs of $750,000-$999,999 million in 2008 or higher will receive 50 percent of this amount in January 2010 and 25 percent in January 2012, if they grow their GDCs 25 percent or more over the three-year period.
