Morgan Stanley will require its financial advisors to generate more revenue next year to maintain the same payout rate, according to a memo sent to employees on Thursday. The firm plans to increase the revenue thresholds that determine when an advisor moves from a lower payout percentage to a higher one by 10% across the board.
Because revenue in wealth management is largely tied to client assets, the change means advisors will need more assets in the accounts they manage to avoid a pay cut. The adjustment is designed to address a common industry issue known as “grid creep,” where advisors earn more simply because the assets they oversee appreciate in value, rather than through bringing in new clients or making better investment decisions.
Why Firms Adjust Payout Grids
Many firms periodically tweak their payout policies to partially offset grid creep. The last time Morgan Stanley adjusted its pay thresholds was in 2024. Compensation consultant Andrew Tasnady explained to Financial Planning last year that firms rarely fully offset grid creep but often take steps like stretching the grid.
“If you’re trying to keep your payout rate in a percentage term steady, you’re always having to make some reductions in your compensation rates to partially offset that,” Tasnady said. “I’ve never seen firms completely offset grid creep. But they partially offset it, one of the options is just to do a grid stretch.”
Sources familiar with Morgan Stanley’s pay policies noted that gross revenue for the firm’s financial advisors has increased by 56% on average over the past three years. During the same period, the firm’s haul of net new assets — which excludes market appreciation — was $1.1 trillion.
Payout Percentages Remain Unchanged
Even as Morgan Stanley requires advisors to produce more revenue to move between compensation rates, the actual percentages paid out will not change. They will still range from 28% for the lowest producers to 55.5% for the highest.
This year, Morgan Stanley advisors who produced $1 million in annual revenue took home 44% of that total. Those who produced $2 million kept 48%.
“Each year, we take a thoughtful look at our plan to make sure it continues to reward growth, encourage the right behaviors and drive our strategy,” Vince Lumia, head of client segments at Morgan Stanley Wealth Management, wrote in the memo. “The 2027 updates are designed to support the continued strength of our business while helping you maximize the full potential of your practice through the Firm’s unmatched resources.”
Vince Lumia is a managing director and the head of wealth management client segments at Morgan Stanley.
Changes to Retirement Program and Other Compensation
The changes, first reported by AdvisorHub, also include an enhanced bonus for advisors who plan to retire through the firm’s Advisor Legacy Program. Currently, advisors with 25 or more years at the firm can receive a 15 percentage point increase to their payout rate in retirement. Starting next year, that will rise to 17% for advisors with 30 or more years at the firm.
Although Morgan Stanley made no changes to its payout grid this year, it did modify other compensation policies. The amount of pay offered in the form of deferred compensation — which advisors usually must wait years to receive — was cut in half while regular pay was increased by corresponding amounts. Morgan Stanley also started offering new incentives to encourage advisors to build their business by bringing in new assets or getting clients to put money into the firm’s savings accounts and certificates of deposit.