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Smith Barney Ups Deferred Comp

Smith Barney has increased the amount of deferred compensation it will award brokers.

Smith Barney has increased the amount of deferred compensation it will award brokers. As part of the firm's 2007 payout restructure, brokers who produce at least $300,000 a year will be given 0.50-8.75% of annual production in deferred comp, an increase of 0.25-3 percentage points since last year. The awards will be invested on behalf of the brokers. The move puts Smith Barney on par with the rest of the bulge bracket firms, which usually offer 5-10% in firm-funded deferred comp to top producers, said Andy Tasnady, founder of compensation consultancy Tasnady Associates. The move was made "to reflect the new reality of compensation," said Charlie Johnson, CEO of Global Private Client.

Brokers will be able to put the awarded money into a variety of portfolios made up of index funds and alternative investments. Previously only company stock was offered. A spokeswoman declined to say which specific investment would be available. Brokers will be able to cash out of the plan after eight years. Currently, all firm-funded awards vest after five years. "[Smith Barney's compensation change] points to an industry move into more deferred payouts and less cash. It makes competitors offer FAs more [money] to leave [their] firm, helps improve clash flow and is better for P&L because the award can be expensed over the vesting period," said Tasnady.

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