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

Tasnady said he doesn't expect much blowback over this policy.

"With a group [of advisors] this big, there is always going to be a small selection of highly critical and highly complementary reactions, but those aren't generally representative of the whole population," Tasnady said. "That said, most advisors are, of course, extremely leery of comp changes that they could see as taking away opportunity."

Generally, Tasnady said, any updated compensation structure in this industry is going to have its positives and negatives for all stakeholders as a firm's leadership strives to shift behavior to meet bigger goals and objectives.

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."

Credit: Bloomberg