Morgan Stanley's 2025 Comp Plan Intensifies Cross-Selling Push

What You Need to Know

Morgan Stanley's newly revealed 2025 compensation plan incentivizes its wealth advisors to make intra-firm referrals.
The move builds on the incoming-referral success advisors have seen and makes referrals more of a two-way street.
Compensation consultant Andy Tasnady doesn’t expect much blowback over these policies.

Morgan Stanley’s 2025 compensation plan includes a boost in incentives for financial advisors who share information about their client accounts with other parts of the bank, such as its private wealth operations, Graystone institutional management, corporate retirement unit and its corporate cash investment team.

“Consistent with our business strategy, the 2025 Advisor Compensation Plan is structured to facilitate opportunities for leveraging and partnering with one another to deliver the breadth of the firm’s offerings to our clients,” said Vince Lumia, head of wealth management client segments, in a memo shared with the firm’s 15,000 financial advisors this week.

“As such,” Lumia explains, “updates to the plan are focused on rewarding growth to maximize the full potential of your practices and support you as you continue to attract new clients and deepen your existing relationships.”

(Morgan Stanley shared some sections of the memo with ThinkAdvisor via email; contents of the memo were first reported by AdvisorHub and Barron’s.)

The bank also confirmed some key details in the 2025 compensation plan, including the fact that advisors making qualifying referrals can earn a 60% credit rate on subsequent eligible revenue, compared with a current grid range of 28-55.5%.

Credit rates will increase to 65% on all gross revenue generated through referrals to the firm’s strategic client management team. The firm is also raising its annual production threshold by 20%, to $360,000 from $300,000. Apart from this change, the 2025 plan will not affect the core payout grid established for 2024.

In addition, Morgan Stanley is introducing a 1% credit rate enhancement for clients with certain recurring deposits or CashPlus accounts that meets its fee waiver criteria (such as having a $5,000 monthly deposit or $10,000 average daily cash), subject to certain limitations.

The latest incentives aim to further expand advisors’ support of Morgan Stanley CEO Ted Pick’s goal of building a more unified firm that draws new institutional clients from its retail wealth business, according to compensation strategy consultant Andy Tasnady.

“This type of referral-based cross-selling is a behavior that has been encouraged at the firm for years now, and there are already incentives in place for advisors to want to make these referrals,” Tasnady observed.

“What Morgan Stanley is doing here is further emphasizing the importance of these referrals by increasing the potential compensation advisors can earn. It’s not a big change,” he explained in an interview.

Still, Tasnady said, it’s interesting to see new compensation tied to clients who make qualified recurring deposits or who maintain sufficient balances in a CashPlus account.

“Morgan Stanley isn’t the only firm moving in this direction,” he noted. “Lending in general is an area where we are seeing a big push for referrals among companies that have a lending arm. At Morgan Stanley, this is already well established, but the new policy is saying that this is important — and we are going to give you a higher payout for meeting these goals.”

Making Referrals a Two-Way Street

When it comes to the broader trends involving referral-based compensation, Tasnady said, things have so far resembled more of a one-way street for wealth advisors and their firms.

“Advisors love it when business comes their way from the broader enterprise, to the point where it helps keep advisors in their seat,” he explained. “From what I understand, Morgan Stanley has been doing a good job getting referrals from other business lines to its wealth advisors.”

With the proven success of such referral-based sales, firms are naturally interested in seeking ways to increase flows in the other direction — whether into investment banking, small-business loans, insurance or the various other capabilities any given company is going to have on offer.

“Remember, every advisor is completely different,” he noted. “It just depends on how they run their practice and think about serving their clients. I expect some will fully take advantage of this and some probably don’t worry about it at all.”

The bulk of advisors at Morgan Stanley (or elsewhere) will probably have some referrals to make in any given year or performance-measurement period, “but it will be more on a lumpy, opportunistic basis.”

In the area of investment banking, for example, an advisor with 200 or 300 clients will likely see just a small handful of them experience a big liquidity event that gives them the chance to make incentivized referrals in any given year. The same goes for services like mortgage lending or big insurance sales, according to the consultant.

Plus, some advisors could be hesitant to rush into making more and more referrals since there is actually some risk involved. “Even intra-firm, not all referrals are going to go well,” he said. “Advisors may be hesitant to make referrals for that reason, because it could end up souring the original relationship.”

Overall, Tasnady — who has worked on compensation strategy with firms like Merrill Lynch, Wells Fargo, UBS and Charles Schwab — says the best way to understand a firm’s complete compensation package is to understand that it’s “meant to send a message.”