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Morgan Stanley Caps Brokers’ Commissions on ETFs

May 2, 2017

Morgan Stanley has capped how much its financial advisors can charge clients for trading stocks, exchange traded funds, annuities and unit investment trusts, according to Reuters, citing other media reports.

Maximum commissions brokers can collect on equities and ETFs have been set at 2.5% as of the start of May but it is not clear if the wirehouse previously capped commissions, the newswire writes.

Unnamed brokers tell website AdvisorHub the cap isn’t dramatic in this case since few advisors would charge as much as that. But one Morgan Stanley advisor in the South tells the website the move definitely favors clients. The advisor’s commission charge was 10% lower as a result of the changes, the website writes.

The website doesn’t specify the restrictions on annuities and UITs, but brokers say these caps may have more far-reaching effects because reps are attracted to high-commission products. A Morgan Stanley spokeswoman confirms “new commission structures” for the products and tells AdvisorHub they “lower client costs, in some cases substantially.” Meanwhile, the brokerage is keeping a $125 minimum ticket charge requirement, according to the website.

Morgan Stanley’s commission cap is in part prompted by the Department of Labor’s fiduciary rule, the site asserts. The rule, which purports to require retirement brokers to put clients’ interests first, has been delayed by at least 60 days from its original April 10 scheduled implementation.

But Morgan Stanley, much like many of its brokerage rivals, has said previously it would go through with plans to prepare for the rule regardless of whether it’s rolled back under president Donald Trump, as reported previously. And an unnamed Morgan Stanley advisor in the Southwest tells the site that the commission cap is good for the wirehouse’s brokers regardless of the fiduciary rule’s fate because “it takes away a lot of the pricing uncertainty that clients are asking about.”

It also helps the firm’s overall strategy of transitioning away from commission-based accounts to fee-based accounts, which are less volatile, the site writes.

By Alex Padalka
  • To read the Reuters article cited in this story, click here.
  • To read the AdvisorHub article cited in this story, click here.