MSSB offers retention bonuses

Morgan Stanley will offer a retention package for brokers who will be part of the new Morgan Stanley Smith Barney joint venture of up to 105% of 2008 production.

Morgan Stanley will offer a retention package for brokers who will be part of the new Morgan Stanley Smith Barney joint venture of up to 105% of 2008 production.
Veteran reps doing less than $500,000 will get nothing.
Details of the deal were given to Morgan Stanley and Smith Barney managers last Friday.
The package incorporates an upfront cash payment in the form of a nine-year note that brokers will receive in January 2010, several months after the joint venture is expected to close
A back-end portion, also cash, will be paid in January 2012 via a seven-year note.
To qualify for the back-end piece, brokers producing less than $1.75 million will have to increase revenue by 25% from yearend 2008 to yearend 2011.
News of the MSSB deal came as Wachovia Securities LLC of St. Louis announced that Wells Fargo & Co. of San Francisco will not be offering a retention package to Wachovia brokers.
Retention deals have become politically sensitive in light of the government role in propping up the big banks.
Both Morgan Stanley and Citigroup Inc., parent company of Smith Barney, have taken taxpayer funding. All are based in New York.
The MSSB deal, with a value of $2 to $3 billion, will be paid from operating revenues, said Jim Wiggins, a Morgan Stanley spokesman.
The deal is needed because “some of the foreign banks that are not subject to [the Troubled Asset Relief Program] have been very aggressive in recruiting” brokers, Mr. Wiggins said, referring specifically to UBS Financial Services Inc. of New York.
The MSSB package breaks down this way:
• $1.75 million-plus producers: 75% upfront/30% on the back end. The back-end portion is guaranteed.
• $1.5 million to $1.74 million: 75% upfront/30% on the back end. The back-end piece is subject to the growth hurdle.
• $1 million to $1.49 million: 75%/25%. The back-end piece is subject to the growth hurdle.
• $750,000 to $999,999: 50%/25%. The back-end piece is subject to the growth hurdle.
• $500,000 to $749,999: 30%/30%. The back-end piece is subject to the growth hurdle.
For brokers with industry length of service of two to five years, $250,000-$499,000 in production will earn them from 10% to 20% on the front end and 25% on the back end, with the back-end portion contingent on making the growth hurdle.
Six-year brokers doing from $300,000 to $499,999 in gross sales, and seven-year vets producing $350,000 to $499,999, will get 10% on the front end and 25% on the back end, the latter of which is again subject to increasing revenue by 25%.