How Morgan Stanley Is Compensated By You
Depending on the types of relationships you establish and the ways you choose to do business with us, Morgan Stanley may be compensated for the services we provide through transaction commissions and markups, asset-based fees and other fees and charges.
Morgan Stanley Wealth Management Schedule of Miscellaneous Account and Service Fees
Your Morgan Stanley relationship enables you to select from a variety of account types, to help meet both everyday needs and long-term objectives. To understand the account and service fees1 that may be applied to your account(s) please visit account and service fees. Fees may vary by account type or other factors, and are subject to change. Some fees may be waived at certain asset levels or for various programs and accounts, such as, but not limited to, Reserved,2 and CashPlus Brokerage Accounts. Fees listed exclude advisory fees, commissions, commission equivalents or markups. Please speak with a member of your Morgan Stanley team if you have any questions regarding our account or service fees.
Brokerage
For brokerage activity, we offer transaction-based pricing in which you pay commissions, sales loads, markups/markdowns or other fees for each transaction you and your Financial Advisor execute. You can conduct transaction-based business in virtually all financial products and services within an Active Assets Account or in retirement, education savings, or other accounts we offer.
Choice Select
If you are a moderate or active trader, you should consider enrolling in Choice Select — a pricing alternative for brokerage accounts. Choice Select pricing is an alternative way to pay commissions on a per-trade basis for eligible equities and options transactions in a brokerage account. With a sliding scale commission schedule, the more you trade, the lower your marginal commission rate. The schedule is based on the principal volume of eligible trades executed annually, and commissions are charged monthly in arrears. Choice Select is a brokerage service not an investment advisory offering. Any investment advice provided by Morgan Stanley is solely incidental to the brokerage services we provide. You do not pay for, nor do you receive, any investment advisory services or a level of advice different from that provided to other full-service brokerage clients who pay on a per-trade basis.
Investment Advisory
In our investment advisory programs, you generally pay an asset-based fee, charged monthly in advance, based on the total value of the assets in your account at the end of the previous month. Unless otherwise noted, the asset-based fee generally covers our investment advisory services, trade execution, custody of securities at Morgan Stanley, reporting, and compensation to your Financial Advisor. Depending upon the investment advisory program you select, you may also be charged a professional money manager’s fee as well as additional fees for overlay services and platform maintenance. Our services and responsibilities, as well as the applicable fees charged to your account, are described in the investment advisory agreement we enter with you as well as the Form ADV Brochure applicable to the program you have selected.
You may select from our comprehensive suite of managed account programs, which are designed for various levels of investment experience and sophistication, with asset minimums that start as low as $5,000. Depending upon the program, your investment advisory account may include stocks, bonds, money market funds, mutual funds, exchange-traded funds and cash. You can establish investment advisory relationships for your retirement or trust accounts in addition to your personal investment accounts. If you select one of our Non-Discretionary advisory programs, your Financial Advisor will provide investment advice, but you will retain decision-making authority over your account.
Morgan Stanley offers financial planning services through LifeView® Advisor and LifeView® Personal Wealth Advisor. Using these tools, your Financial Advisor can assist you with the evaluation of your financial goals and help you develop an investment strategy to meet goals such as planning for retirement, funding an education and insurance planning. FAs have the option to charge a minimum of $250 and up to a maximum of $5,000 per client. FAs who hold one of the following professional designations: Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Chartered Personal Wealth Advisor (CPWA), Chartered Financial Consultant (ChFC), Certified Trust and Financial Advisor (CTFA) or Family Wealth Director (FWD), may charge up to a maximum of $10,000 if assets in a LifeView Plan a re over $5MM.
Lending Services
Morgan Stanley offers a variety of lending products to individuals and businesses. We are compensated for these services in two ways: through fees when the loan or credit line is initially established and/or through ongoing interest charges. These fees and payments depend on the type, structure and duration of the advance.
For margin and Express CreditLine (ECL) loans, you are not charged upfront fees. Normally, ongoing interest charges are calculated and paid based on a variable interest rate. Principal is usually repaid at your discretion, although we may exercise our rights under our agreement with you at any time if there is a collateral shortfall.
For a Liquidity Access Line, which is a securities-based loan/line of credit product, the lender of which is either Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A., as applicable, each, an affiliate of Morgan Stanley Smith Barney LLC, clients are typically not charged upfront fees to set up the line of credit.4 Various loan structures can be established in one loan account, including a variable rate advance and fixed rate advance. Unless otherwise instructed, interest charges are capitalized on a monthly basis. Fixed rate advances may carry prepayment fees, which can be substantial based on the prevailing interest rates, and we can provide additional details upon request. The ongoing principal and interest payments depend on the type, structure and duration of the loan. Principal is usually repaid at the client’s discretion, although Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A., as applicable, may exercise its rights under its agreement with you at any time, including if there is a collateral shortfall. You can also request that Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A., as applicable, establish a standby letter of credit on your behalf, which would be backed by your Liquidity Access Line. Fees on standby letters of credit are based on the issuance amount of the letter of credit. Fees, interest and principal payments are paid to Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A., as applicable. The proceeds from a non-purpose Liquidity Access Line loan/line of credit (including draws and other advances) may not be used to purchase, trade, or carry margin stock; repay margin debt that was used to purchase, trade or carry margin stock; and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account. CRC#5670334 (05/2023)
Other Compensation
Morgan Stanley and its affiliates may earn compensation in other, more indirect ways with regard to certain of the products you purchase or services you receive. For example, Morgan Stanley may earn compensation in connection with the provision of investment banking, prime brokerage, institutional brokerage or placement agent services, as well as stock loan or other lending, money-management or trading-desk activities. Certain investment vehicles may include securities of Morgan Stanley’s parent or other affiliates and companies in which Morgan Stanley or its affiliates make a market or the officers or employees of Morgan Stanley or Morgan Stanley’s affiliates own securities.
How Morgan Stanley Compensates Your Financial Advisor
With the exception of compensation in connection with residential mortgage loans, your Financial Advisor’s compensation is based primarily on the fees and commissions that you pay us. Different products have different compensation structures and, accordingly, our Financial Advisors get paid more or less depending on the product or service you choose. In general, the percentage of Morgan Stanley’s fees and commissions we pay to our Financial Advisors in incentive compensation depends upon the type of account or pricing structure you have established with us, as well as the particular product you purchase. The more overall gross revenue a Financial Advisor generates, the higher his or her credit rate.
On certain lending products like Margin, Liquidity Access Line, Portfolio Loan Account and Express CreditLine, Financial Advisors are credited with up to 65 basis points of the balance of the loan depending on the product and level of discount with the individual loan. For Tailored Lending, Financial Advisors are credited up to 15% of the spread of the balance of the loan depending on the level of discount with the individual loan. Morgan Stanley also has partnerships with third party lenders. Your Financial Advisor may receive a fee for placing certain non-mortgage loans with third-party lenders. The fees vary according to the specific third-party program. Financial Advisors may also receive ongoing compensation (called residuals) on some investment products.
The Incentive Compensation Credit Rate varies and is subject to change. The Incentive Compensation Credit Rate ranges from 20% to 55.5%, with a portion of Total Credits awarded to the Financial Advisor as Deferred Compensation, and the remainder of the Total Credits awarded as Cash Compensation.
In addition to the Credit Rate Schedule outlined above, your Financial Advisor may be eligible for bonuses, based on the total Gross Revenue he or she generates during the year, his or her Length of Experience in the wealth management industry, his or her clients’ Margin, Liquidity Access Line/Portfolio Loan Account/Express CreditLine and Tailored Lending balances, Mortgages closed, and the number of new Lending units opened during the year. Your Financial Advisor may be eligible to receive financial incentives in connection with the transition of his or her employment to Morgan Stanley. Such incentives may include sign-on bonuses and/or loan-bonus arrangements, equity awards, buy out of forfeited Deferred Compensation or retention arrangements, special commission arrangements, supplemental bonuses or loan-bonus arrangements, and may be contingent upon your Financial Advisor satisfying certain performance-based criteria which may depend on total client assets serviced by the Financial Advisor at Morgan Stanley and/or the revenue they generate.
Your Financial Advisor will receive reduced or no Incentive Compensation for transactions below certain commission levels, as well as for households that do not meet certain asset minimums.
Float
Morgan Stanley may retain, as compensation for its provision of services, your Account’s proportionate share of any interest earned on aggregate cash balances held by Morgan Stanley or an affiliate with respect to assets awaiting investment. Such interest retained by the Custodian shall generally be at the prevailing Federal Funds interest rate.
Footnotes:
1 Some of the fees described are charged by Morgan Stanley Smith Barney LLC (Morgan Stanley), while others are charged by third parties. Fees, discounts and waivers are subject to change at any time, and we reserve the right to implement new fees in the future. Morgan Stanley reserves the right, in its sole discretion, to discount or waive any fees. If you have any questions regarding these fees, please contact a member of your Morgan Stanley team or call the number on your account statement.
2 Effective November 13, 2023, to qualify for Reserved, a client’s household must have and maintain a minimum of $2,000,000 in eligible assets and liabilities or paid $20,000 in managed fees / commissions. Annual managed fees/commissions paid is generally defined as revenue generated in fee-based accounts and commissions generated in non-fee based accounts, and is calculated on a rolling 12-month basis. Not all revenue is included; Morgan Stanley reserves the right to exclude certain items of revenue in its sole discretion. There is no cost to be enrolled in Reserved. Morgan Stanley reserves the right to change or terminate the Reserved program at any time and without notice. Notwithstanding the fact that a client has achieved Reserved status, Morgan Stanley reserves the right to charge any fee that is normally waived for a Reserved client if a determination is made in Morgan Stanley’s discretion that the client’s usage of any such service is beyond the scope of what is normal and customary and is abusive or excessive. Reserved program participants’ accounts and activity are reviewed periodically to confirm that they continue to qualify for Reserved. Morgan Stanley households are evaluated using eligible assets and liabilities and annual managed fees / commissions paid from Morgan Stanley or a combination of E*TRADE from Morgan Stanley and Morgan Stanley accounts. Clients who qualify for Morgan Stanley Reserved may also be eligible to enroll in Morgan Stanley’s complimentary loyalty program, Reserved Living & Giving. For information on how to qualify for the Reserved Living & Giving program please visit msreserved.com.
3 Options are not appropriate for all investors.
4 Clients may be responsible for fees of a third party law firm engaged by Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A. to review complex Liquidity Access Line transactions (e.g. review of trust agreements). Clients will also be charged a fee for the issuance of a letter of credit, prepayment of principal on fixed-rate advances and upon a client’s request for certain cash management services (e.g. duplicate statements and check reorders.)
Disclosures
Borrowing against securities may not be appropriate for everyone. You should be aware that there are risks associated with a securities based loan, including possible maintenance calls on short notice, and that market conditions can magnify any potential for loss. For details please see the important disclosures below.
Important Risk Information for Securities Based Lending: You need to understand that: (1) Sufficient collateral must be maintained to support your loan(s) and to take future advances; (2) You may have to deposit additional cash or eligible securities on short notice; (3) Some or all of your securities may be sold without prior notice in order to maintain account equity at required maintenance levels. You will not be entitled to choose the securities that will be sold. These actions may interrupt your long-term investment strategy and may result in adverse tax consequences or in additional fees being assessed; (4) Morgan Stanley Bank, N.A., Morgan Stanley Private Bank, National Association or Morgan Stanley Smith Barney LLC (collectively referred to as “Morgan Stanley”) reserves the right not to fund any advance request due to insufficient collateral or for any other reason except for any portion of a securities based loan that is identified as a committed facility; (5) Morgan Stanley reserves the right to increase your collateral maintenance requirements at any time without notice; and (6) Morgan Stanley reserves the right to call securities based loans at any time and for any reason.
Liquidity Access Line (“LAL”) is a securities based loan/line of credit product, the lender of which is either Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A., as applicable, each an affiliate of Morgan Stanley Smith Barney LLC. All LAL loans/lines of credit are subject to the underwriting standards and independent approval of Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A., as applicable. LAL loans/lines of credit may not be available in all locations. Rates, terms and conditions are subject to change without notice. To be eligible for an LAL loan/line of credit, a client must have a brokerage account at Morgan Stanley Smith Barney LLC that contains eligible securities, which shall serve as collateral for the LAL. In conjunction with establishing an LAL loan/line of credit, an LAL facilitation account will also be opened in the client’s name at Morgan Stanley Smith Barney LLC at no charge. Other restrictions may apply. The information contained herein should not be construed as a commitment to lend. Morgan Stanley Private Bank, National Association and Morgan Stanley Bank, N.A. are Members FDIC that are primarily regulated by the Office of the Comptroller of the Currency. The proceeds from a non-purpose LAL loan/line of credit (including draws and other advances) may not be used to purchase, trade, or carry margin stock; repay margin debt that was used to purchase, trade, or carry margin stock; and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account.
Borrower shall pay Morgan Stanley Private Bank, National Association or Morgan Stanley Bank, N.A. (“Bank”), as applicable, a prepayment fee if any portion of the principal on a Fixed Rate Advance is prepaid prior to the applicable Scheduled Payment Date(s), regardless of the reason that the Fixed Rate Advance is prepaid, and including, without limitation, as a result of a demand by the Bank or liquidation of collateral by the Bank. The Bank, in its sole discretion, can make a Variable Rate Advance and apply the proceeds to such prepayment fee. Interest will accrue on the unpaid portion of the debited amount at a variable interest rate until the amount is paid in full.
Morgan Stanley Smith Barney LLC is a registered Broker/Dealer, Member SIPC, and not a bank. Where appropriate, Morgan Stanley Smith Barney LLC has entered into arrangements with banks and other third parties to assist in offering certain banking related products and services.
Investment, insurance and annuity products offered through Morgan Stanley Smith Barney LLC are: NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED | NOT A BANK DEPOSIT | NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY