Coffee’s for closers only at Morgan Stanley’s sales contests
At the nighttime sales contests at James Gorman’s Morgan Stanley, the coffee is for closers.
The Wall Street bank promoted a “Glengarry Glen Ross” type of environment as it pushed risky loans on its wealthiest clients, despite the contest’s prizes posing an apparent conflict of interest, The Post has learned.
And the contest, in which prizes were awarded to employees who sold the most loans, first described by the bank as being limited to the New England region, was carried out in more locations and was more aggressive than previously known, according to sources.
On March 2, The Post reported exclusively that the bank, beginning in 2013, ran a pilot program in its New England region, which includes New York and New Jersey, that divided advisers into “teams” and offered them financial incentives for selling securities-based loans, or SBLs — a huge profit center for the bank.
Company-wide sales of SBLs in 2015 jumped by 31 percent, to $25 billion, Gorman said in a January 2016 presentation.
But the program was also active in one of the bank’s largest Florida complexes, where choice tickets to NBA games were used as incentives, according to a former employee.
“I remember having a late-night sales contest in our complex and the winner got a pair of Orlando Magic tickets if they sold the most SBLs that night,” Jerry Mitchell, a former Winter Park adviser, said in an interview last week.
“They held it at night so that the advisers could focus on just selling the SBLs and not being distracted by trading or other work,” said Mitchell, who now runs Incite Wealth Management. “It’s kind of an old-school sales ritual type of thing similar to the movie ‘Glengarry Glen Ross,’ ” he noted.
“Most advisers weren’t too happy about being forced to sell lines of credit, but it was a big focus of Morgan Stanley’s,” he added.
Incentivizing employees to sell a specific product is frowned upon by regulators.
After the exclusive report in these pages, the Financial Industry Regulatory Authority started making inquiries, The Post reported March 3.
The pilot program run by the bank, headed by CEO Gorman, paid out thousands of dollars in incentives to advisers via a so-called “business development account.”
Christine Jockle, a bank spokeswoman, has previously claimed that the pilot program was intended for advisers to grow their business, and has disputed that it was connected to any sales contests. It was “limited,” Jockle said, while refusing to give details about the number of advisers or the regions in which it was used. The program has since ended.
While there was officially some oversight of the business development accounts, Mitchell said managers “could be real flexible with some advisers” about the rules.
“If you were a large enough producer you would get a lot of flexibility,” he said. “All expenses and purchases had to go through an approval process but the Complex Manager and Sr. Complex Service Manager had the autonomy to push things through.”
Steven Mitchell, the Winter Park complex manager, didn’t return a call seeking comment.
Jockle denied that any Morgan Stanley adviser was paid inappropriately.
“Client suitability and best interests are primary considerations when opening these accounts,” she said.