Pay Packages For Brokers Shrink As Market Constricts
By Cheryl Winokur Munk, Staff Reporter of The Wall Street Journal
March 28, 2001
NEW YORK — A year ago, when it appeared there were no upward limits for the stock market, huge signing bonuses for stockbrokers were a no-brainer.
Today, Wall Street firms are still doling out big premiums to attract top talent, but for the most part they’ve curbed the high-flying pay packages of last year, recruiters said. Firms are also starting to be more picky about production levels, type of assets and the experience of brokers they hire.
“It’s a function of the market. Brokerage firms are cutting back staff and as a result they also feel the opportunity to hire brokers is good, but the need to pay out large sums of money is not as prevalent,” said Charles Amerkanian, owner of Hudson Management Group, a New York recruiting firm.
In the past month, Amerkanian said he’s seen pay packages for top producers fall to 75% of trailing 12-month gross commissions, while other recruiters said they’ve seen packages between 90% and 110% at the high-end, from levels of 125% last year at certain firms.
Historically, firms had offered recruiting packages in the range of 75% of trailing commissions, said Rick Peterson, owner of Rick Peterson & Associates in Houston. But payouts heated up along with the market and competition.
Firms such as Merrill Lynch & Co. (MER), Salomon Smith Barney, Prudential Securities, Morgan Stanley Dean Witter & Co. (MWD) and UBS PaineWebber Inc. are known to pay hefty packages to woo brokers from rival firms, recruiters said. Last year, when the market was hot, some firms reportedly paid certain brokers even more than 125% of trailing 12-month commissions in rare cases.
To be sure, the pay packages, which include such things as upfront checks, back-end bonuses, asset-transfer bonuses and stock options, vary by firm, broker assets, geographic region, and experience level. So certain brokers could still command higher-than-average premiums today. But for the most part, firms are tightening purse strings.
Morgan Stanley, for example, will soon drop its pay package to 70% of trailing 12-month gross commissions for high producers - those with more than $1 million of production who meet certain conditions - said a recruiter who asked not to be named. Lower producers get smaller packages, the recruiter said.
The firm was paying 100% maximum for brokers who produced 12-month trailing gross commissions of $500,000 or more and met certain conditions, the recruiter said.
Morgan Stanley declined to comment on its compensation packages.
Another firm, UBS PaineWebber, is paying about 100% of trailing 12-month gross commissions for top people, but is being more selective about who it hires, the same recruiter said. There were instances last year where the firm paid as much as 125% of trailing 12-month gross commissions.
UBS PaineWebber declined to comment on its pay practices.
In January, Prudential, dropped its pay package for top producers to 100%, from up to 150% last year, the same recruiter said. Prudential Insurance Company of America, the firm’s parent, plans to go public so it is belt tightening, the recruiter said.
The firm declined to comment on compensation issues.
Barry Nathanson, a recruiter with Barry Nathanson Associates in Great Neck, N.Y., said some firms are still paying top dollar for major talent. But it’s “more difficult to get that maximum now and even that is being seriously looked at.”
The bar has also lowered for those below the top tier. A year ago, not-so-outstanding producers still could get up to 100%, but now they’re getting 60% to 70%, he said.
Just because recruiting packages are shrinking doesn’t mean firms have stopped hiring. In fact, hiring has picked up because the regional firms are once again able to participate, said Peterson, the recruiter in Houston. “They can compete at these levels.”
Even so, some brokers are loath to switch firms right now, given the shaky economy. “A lot of people are not moving right now. They would rather keep their accounts rather than start all over again with a big pay check,” said the recruiter who asked not to be named.
-By Cheryl Winokur Munk, Dow Jones Newswires; 201-938-2123; cheryl.munk@dowjones.com
Copyright (c) 2000 Dow Jones & Company, Inc.