By George C. Miller, Esq.  of Shustak Reynolds & Partners, P.C. posted on Monday, June 1, 2015.

George C. Miller

Partner

Location: San Diego, California
Phone: (619) 696-9500 (Ext. 105)
Direct: (619) 501-8270
Email: [email protected]

Wall Street firms are increasing the percentage of wages paid to financial advisors as "deferred compensation."  The shift comes in the wake of the "great migration" of advisors from wirehouse firms, like Morgan Stanley, Merill Lynch and UBS, to independent platforms offered by LPL Financial, Raymond James, Wells Fargo, Commonwealth and others.  

By way of example, for 2015, Morgan Stanley reportedly decreased its advisors' take-home wages from 2% to as much as 11%, depending on the advisor's production, length of service and other factors. Morgan Stanley then takes the position, as do most other firms, that those wages do not vest for 8 to 10 years in the future.  As a result, if an advisor wishes to transition to a new firm before all of their deferred compensation vests, firms take the position they "forfeit" the unvested portion of their earned but unpaid wages and bonus monies.  

The new trend has resulted in a number of legal challenges.  Just last year, Wells Fargo settled a $7 million deferred compensation class action claim brought by former advisors Kennison Wakefield and William Stonhaus, who claimed they should have been paid all accrued deferred compensation, whether vested or unvested, upon departing the firm.  In 2012, Merrill Lynch settled a similar deferred compensation class action for $40 million. 

Given the trend toward increased deferred compensation payments, we expect to see a rise in FINRA arbitrations and other claims involving deferred compensation.  Our attorneys have extensive experience representing registered representatives and investment advisors in a variety of securities industry matters, including deferred compensation forfeiture claims and bonus disputes. Contact us today for a confidential analysis of your situation.  

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