Morgan Stanley, the brokerage with the biggest corps of financial advisers, changed its wealth-management compensation plan to encourage brokers to increase revenue and allow them to buy discounted stock.

The 2013 program pays a bonus of 2 to 5 percentage points of revenue for advisers who bring in new assets and are in the top 40 percent in revenue growth, according to terms outlined in a summary obtained yesterday by Bloomberg News. That comes at the expense of a 2 percentage-point reduction in the revenue bonus paid to all brokers who generate at least $750,000.

Greg Fleming, president of Morgan Stanley’s wealth- management business, is seeking to control costs while avoiding defections and meet his target of a mid-teens pretax margin next year. Wealth-management employees typically have been paid a higher portion of revenue than colleagues in trading units because the brokerage business takes less risk and demands lower levels of capital.

“There remains a lot of pressure from a recruiting standpoint,” Fleming, 49, said at a Dec. 4 investor conference in response to a question about possible changes to pay structure. “The existing system for compensation also works for shareholders.”

The changes don’t affect the so-called grid payout, usually the largest portion of a broker’s compensation, or the bonus based on tenure.

Street’s Richest

The growth bonus, in addition to the revenue percentage award, includes as much as $285,000 for bringing in more money from customers and making additional loans to clients, according to the document. The bonus, which the firm described as “richest on the Street,” is paid upfront in 2014 and structured as a five-year forgivable loan.

Brokers can invest as much as $250,000 of their compensation in Morgan Stanley stock and will get as much as a 25 percent bonus on shares they purchase, according to the plan. The bonus shares vest in April 2016, when the purchased shares are distributed.

Fleming said this week that his unit can reach profitability targets solely through cost cuts, meaning revenue improvements may provide a further boost. Integration expenses will end this quarter, allowing the pretax profit margin to increase next year, Fleming said. The margin was 13 percent in the third quarter, excluding one-time charges.

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