As reported in Investment News, the days of large recruiting bonuses paid by wire houses may be over, as Morgan Stanley and Merrill Lynch have reported a slowdown in giving big recruiting bonuses. These bonuses escalated after the recession, creating what Morgan Stanley CEO James Gorman calls an effective "tax on the industry."
In fact, only 57% of the firm’s wealth management revenue was allocated to recruiting bonuses in Q3, down from 63% last year. Merrill indicated that they enjoyed their highest quarterly profit since 2007 in Q3. When Bank of America bought Merrill, it offered 6,000 advisors a retention bonus, which is unlikely to be renewed. On the other hand, UBS appears to continue spending, with 9.5% of the firm’s operating profit allocated to bonuses.
Part of the reason for these large bonuses (which can run as high as six times take-home pay) could be FINRA’s recent action to require advisors to disclose payments to clients. Some members protested that move, claiming that it would stifle movement. Meanwhile, training programs to replace retiring advisors are not keeping up. So where will the new crop of advisors come from?
