Morgan Stanley May Cut Retail Broker Compensation - Analyst Blog


In a drive to lower staff expenses, Morgan Stanley ( MS ) has decided to slash the compensation offered to the retail brokers, per a Reuters report. The New York-based brokerage firm intends to pay a smaller portion of the revenues from the wealth management segment to the retail brokers responsible for generating them.

Morgan Stanley actually wants to bring down the wealth management revenues paid to the brokers to 55% or lower, from the current figure of 60%. Provided it materializes, the plan would save $884.0 million for the bank in 2015. However, the bank has not yet taken any final decision regarding the compensation slash. Given the importance of the retail brokers, along with the intensely competitive hiring environment, this step may cost the bank dearly.

Notably, wealth management is the most dominant business segment for Morgan Stanley, accounting for over 40% of its total annual revenues and around 60% of its pre-tax profit. The brokers play a crucial role in generation of the revenues.

Again, the advisors enjoy high demand and they have the option to easily switch jobs to other banks with same or higher pay. Many of these advisors even have the capability to set up their independent advisory businesses by pulling out prized customers of the bank. Hence, it would not be an easy decision for the bank to curtail the compensation of the retail brokers.

Morgan Stanley currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the finance sector include CVB Financial Corp. (CVBF) , Central Pacific Financial Corp. (CPF) and Westfield Financial Inc. (WFD) . All these stocks sport a Zacks Rank #1 (Strong Buy).

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MORGAN STANLEY (MS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CVBF , CPF , WFD , MS

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