Morgan Stanley loses another deferred comp claim to ex-advisors
Two former Morgan Stanley financial advisors on Friday won a $1.1 million arbitration award against their old firm that centered on who controlled valuable deferred compensation money, the firm or the financial advisors.
The two advisors, Jeff Davis and William Swisher, both now work in Dallas for Ameriprise Financial Services after leaving Morgan Stanley, respectively, in 2020 and 2021. In the past, that would have meant an automatic forfeiting of deferred compensation, or a small amount of gross revenue the firm takes and holds, and which typically requires advisors to stay for years in order to vest.
But financial advisors automatically losing that deferred compensation, often referred to as the golden handcuffs in the securities industry, the moment they walk out the door of the old firm appears to be less automatic, with financial advisors gaining some legal wins of late. That’s because advisors like Davis and Swisher are using ERISA – the Employee Retirement Income Security Act of 1974 – in their claims, alleging that Morgan Stanley’s deferred compensation plan was in violation of that law.
“This was money that the advisors worked for at Morgan Stanley, which takes a percentage from their revenue or production and puts it in this deferred compensation program,” said Alan Rosca, one of the attorney who represented the two advisors in the claim. “We think that’s a violation of ERISA, and Morgan Stanley is not the only wirehouse that had a deferred compensation plan.”
He added that earlier this year he won a $3 million claim on behalf of former Morgan Stanley advisors alleging similar violations of ERISA and had many more in the pipeline.
Davis and Swisher alleged that “they earned certain compensation for their
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