Morgan Stanley’s and Citigroup’s Smith Barney’s Retention Bonuses

Campbell Brown’s CNN commentary about Morgan Stanley’s and Citigroup’s Smith Barney’s so called bonuses caught my attention on Wednesday night.

Morgan Stanley and Citigroup’s Smith Barney are two of the companies that are taking bailout dollars and it is being reported that they are using some of the money to supposedly bonus their financial advisors.

The highlights of Campbell’s storey are as follows;

• Brown: Banks reportedly giving “retention awards” to employees
• She says awards are bonuses, given by firms accepting bailout money
• Brown says that’s wrong, to the tune of up to $3 billion in bonuses

The story goes on to say that bonus by another name ( “retention awards” to employees ) is bogus.

I believe that this story is misleading and is fueling unnecessary negativity which is what the news media seems to be obsessed with these days.

It is my belief that the financial advisors that Morgan Stanley and Citigroup’s Smith Barney are wishing to retain are not employees and are independent financial advisors that can easily take their clients and go and work with any investment bank.

In essence you could say that Morgan Stanley and Citigroup’s Smith Barney are the manufacturer of the product and the financial advisor is the independent wholesaler that brings the product out to the consumer public.

With all the negativity going on, these companies are hanging on for dear life and are wanting to retain their financial advisors fore if the don’t, they will lose all their clients and they will be out of business and the bailout money will be down the toilet.

The majority of financial advisors are independent business people who carry the overhead of their assistants along with marketing expenses to attract the clients that they deal with and in essence, they wake up unemployed every morning carrying the overhead that they have through thick and thin and there is a lot of thin right now until things get better.

Some financial advisors could go months without getting paid while carrying the overhead at the same time.

The learning curve is very steep and the failure rate of financial advisors is very high at it takes years of working for very little to get to the place where they have enough clients that they attracted from their own blood sweat and tears … and there are a lot of tears as many don’t make it.

There is an expression; “old financial advisors never die, they just go out of commission”.

They are not earning right now and hanging on for dear life and are being tempted with offers from other financial institutions to take themselves and their clients to other companies.

Call it what you like, bonus or retention, it makes good business sense for without the financial advisors of Morgan Stanley and Citigroup’s Smith Barney, there is no business.