On Friday, hours after Wachovia Securities told managers that the firm’s financial advisors would not receive any retention bonus, Smith Barney and Morgan Stanley reps got some good news: Some extra cash is on the way. Top producers at both firms stand to receive as much as 105 percent of trailing twelve month production to stay with the joint firm. That said, the first of two payments won’t be available until 2010.

The package comes in the form of a nine year forgive able loan, with the first installment slated to be awarded in 2010 and the second installment in 2012. The delay is partly an attempt to deflect any criticism that the bonus money will come out of taxpayer money, or the government’s TARP investment. A spokesperson for Morgan Stanley says the firm prefers the retention money to come out of operating revenue from the joint venture (expected to close in the third quarter) as opposed to TARP. (Citigroup and Morgan Stanley have received a total of $62 billion in federal money since October.)

No wonder, the first week of February on an internal conference call, James Gorman, co-president of Morgan Stanley, explicitly warned advisors, “Please do not call it a bonus. It is not a bonus, it is an award,” according to conference call audio obtained by the Huffington Post.

One top producing Smith Barney rep in south says the package is “reasonable under the circumstances.” However, he says he is not sure how clients are going to take the news, not to mention he thinks the merger with Morgan Stanley is going to be “nightmare.” In addition to consolidating branches (for example this rep says there are a total of seven Morgan Stanley and Smith Barney branches in a 26 mile radius in North Carolina) he expects there to be considerable FA departures, voluntary and not. Indeed with a total of around 20,000 advisors, he speculates that the FA headcount could fall back to around 13,000.

For the most part, this advisor says the retention deal, while appreciated, doesn’t change the fact that times are tough. “To be honest with you, I can’t see the future right now—politicians are dictating our future and that is a problem,” this advisor says. Indeed, today, news came out the government may take up to a 40 percent stake in Citigroup. It just keeps getting better.

By the Numbers

Based on 2008 production numbers, the first part of the “award” will be paid in 2010 and is calculated on a sliding scale. Financial advisors will be eligible for the second installment in 2012. Producers with $1.75 million or more will receive payment equal to 75 percent of 2008 production in 2010 and another 30 percent of 2008 production in 2012, without any requirements that growth hurdles be met. For advisors with under $1.75 million production, the second installment will be equal to between 25 and 30 percent of 2008 production, depending on whether they have increased production by 25 percent through the end of 2011.

Producers with $1.5 million to $1.74 million producers, will receive 75 percent of production in cash plus an additional 30 percent in 2012; for those producing $1 million to $1.49 million, the front end payment will be equal to 75 percent of 2008 production, with a back end payment equal to 25 percent. Meanwhile, advisors generating $750,000 to $999,000, will get 50 percent on the front end and 25 percent in the second payment. Finally, for those producing $500,000 to $749,000, both payments will be equal to 30 percent or production.

FAs who produce less than $500,000 are eligible for award money only if they have been in the business for seven years or less. Those with two to seven years LOE and gross revenue ranging from $250,000 to $499,000 will be eligible for 10 to 20 percent of 2008 production. They can jack up the second installment to 25 percent if they meet the 25 percent growth hurdle by year-end 2011.