Although they’re all one super-firm now, high-producing Smith Barney brokers are still earning more than their Morgan Stanley colleagues generating the same amount in production. All Morgan Stanley Smith Barney brokers will move onto a unified compensation plan next year, but the question remains: which plan?
            According to On Wall Street’s 2009 compensation survey, Smith Barney brokers who generated $1 million in production per year received the highest potential payout of all wirehouse brokers in terms of their cash payout, year-end bonus and deferred bonus.
            Andy Tasnady, a New York-based industry compensation consultant, found that the Smith Barney producers who generate $1 million annually could potentially earn $525,000 per year versus $485,000 for Morgan Stanley brokers in the same bracket.
            Similarly, for brokers producing $600,000 per year, Smith Barney offered the highest payouts ($285,000 versus $274,500 for Morgan Stanley brokers).
            But, on the lower end of the scale, brokers at Morgan Stanley actually earned more. For brokers producing $400,000 per year, Morgan Stanley offered a potential payout of $175,000 (again, including cash payout, year-end bonus and deferred bonus), which was the highest of all the wirehouses. Smith Barney brokers in this bracket could earn $168,000.
            Doug Dannemiller, a senior analyst with Boston-based consulting firm Aite Group, says he believes the combined firm will strive to keep the higher producers happy, but not necessarily maintain Smith Barney’s higher payouts. “These are also the same people who got the retention package,” he says. So even if the former Smith Barney advisors don’t retain exactly the same payout, they’re still ahead when they factor in their retention packages. “Also, with the markets improving most advisors should be earning more, so that should take the sting out (of any reduction in payout rates),” Dannemiller adds.
            Houston-based recruiter, Rick Peterson, says it isn’t the higher producers who will be affected by changes to their payouts as much as the lower producers. “It affects smaller producers in a disproportionate way,” Peterson says. “The trend is to squeeze the lower end and they just have to suffer through it,” he says. Overall, Peterson expects the executives working on the plan will “aim to do the least damage, especially to the people they want to retain.”
            In response, a spokesperson for Morgan Stanley Smith Barney says: “A unified compensation plan will be put in place in 2010 and details will be communicated in due course.”