By George C. Miller, Esq.  of Shustak Reynolds & Partners, P.C. posted on Thursday, February 18, 2016.

George C. Miller

Partner

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

Shustak Reynolds & Partners is investigating potential claims arising out of the forfeiture or cancellation of broker and financial advisor deferred compensation benefits.  Many Wall Street firms, including Morgan Stanley, Wells Fargo, UBS Financial Services and Merrill Lynch require financial advisors to receive a substantial portion of their compensation as “deferred compensation.”  This compensation may not vest for a period of 5-10 years after the year in which it is earned.  Many firms take the position that the deferred compensation is payable only if the advisor remains employed by the firm through the conclusion of the vesting period.  With limited exception, if a broker leaves the firm before the vesting period expires, the compensation may be deemed cancelled or forfeited. 

Last year, we noted that 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 traditional wirehouse firms, like Morgan Stanley, Merrill Lynch and UBS, to independent platforms offered by LPL Financial, Raymond James, Commonwealth and others.  

By way of example, last year 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, and instead credited those wages as “deferred compensation.” 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, Morgan Stanley may take the position they have "forfeited" the unvested portion of their earned but unpaid wages and bonus monies.  

The new trend has resulted in a number of legal challenges.  In late 2014, Wells Fargo settled a 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. 

Shustak Reynolds & Partners, P.C.’s securities and FINRA attorneys have extensive experience representing registered representatives and investment advisors in a variety of securities-industry matters, including deferred compensation forfeiture claims, bonus disputes and SEC and FINRA regulatory investigations and enforcement proceedings.  Contact us today for a confidential analysis of your potential claim. 

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