It’s official. Morgan Stanley Smith Barney is cutting the number of offices, reports. The business is slashing its number of “brokerage complexes” to 86 from 118 and cutting the number of branch managers from 150 to a total of 85. These changes are part of consolidation for the Morgan Stanley brokerage business.

These changes were rumored earlier this month, and were confirmed by Morgan Stanley late last week. The cuts also came shortly after Morgan Stanley revealed that it would cut its regional offices from 16 down to 12. There could be further cuts and changes in the works.

The most recent changes “will create larger complexes representing $150 million to $250 million in revenue,” reports.

Morgan Stanley is tied with Citibank in a joint brokerage business venture, where Morgan Stanley owns 51 percent of the brokerage. This venture began in 2009.


Morgan Stanley is talking about making even more substantial cuts to its Morgan Stanley Smith Barney brokerage business, Reuters reports. There has recently been internal discussion about making a 10% cut to the company’s 120 branch complexes. Just last week, the company cut its regions from 16 to 12, cutting out four managerial positions.  At the end of last year, the company had 19 regions.

According to the Wall Street Journal, Doug Kentfield, Bill McMahon and Rick Skae, three top executives at Morgan Stanley Smith Barney, held conference calls talking with the remaining 12 division directors, reportedly giving them a heads-up that company consolidation, reassignments, and cuts were coming. August 17 was a date discussed for the changes to be revealed.

While there was reportedly no talk about cutting any of the 16,900 financial advisor positions, there could be some eliminations of support staff, compliance, and risk management roles within the branch complexes.

Morgan Stanley currently has 743 retail offices around the world, 16% fewer than in 2010. Morgan Stanley combined its brokerage division with Smith Barney in 2009. In addition, Morgan Stanley said in July that it was planning to reduce the overall company’s head count by 700 by the end of 2012.

Danny Sarch, a recruiter for Leitner Sarch Consultants, told the Journal that Morgan Stanley’s cost-cutting initiatives are known within the company as “Project August.”

Christine Jockle, a spokesperson for Morgan Stanley, declined to comment on the story.


Morgan Stanley Smith Barney took a hit in its second quarter 2012 numbers. reports that while the company’s revenue increased from $193 million to $225 million, revenue dropped from $3.4 billion to $3.3 billion. In addition, money from commissions decreased from $1.2 billion to $976 million.

Money from the company’s ultra-high-net-worth customers decreased as well, going from $580 billion to $560 billion. Morgan Stanley customers who had assets of between $1 million to $10 million saw those assets go down from $735 billion in assets to $704 billion. However, customers who had assets under management of less than $1 million did see their assets gain as much as 10%, reports.

In all, client assets decreased a total of $37 billion, going down to $1.71 trillion. In addition, the fee-based part of Morgan Stanley went up from $1.8 billion to $1.9 billion. The company also lost 259 advisors, going down to 16,934 advisors.

According to a statement from Morgan Stanley, “Expense control is the reason net income increased while revenues declined,” and said that the money from commissions decreased, “primarily reflecting reduced commissions and fees from lower levels of client activity.”

James Gorman, CEO and chairman of Morgan Stanley, said that “in Global Wealth Management, we increased our pre-tax margin to 12 % in an environment marked by investor caution, and we integrated substantially all of our technology systems, which should bring additional value to our clients.” He said that the company was “focused on taking the necessary steps to deliver strong returns for our shareholders.”


The profound demographic trend that is boosting demand for investment advice — the millions of baby boomers retiring or planning their retirement — also is threatening the financial advisory sector with a talent shortage.

Even as more and more older Americans seek advice on bolstering their nest eggs, advisers themselves are looking to head off into the sunset. Too few younger advisers are in the pipeline to replace them.

“It is alarming — and on the verge of being a crisis,” said Robert Patrick, director of private-client-group education and development at Raymond James & Associates Inc. “We’re going to have people retiring in droves out of our industry.”

The result could hurt advisers as they try to meet growth targets for their firms, as well as make succession plans.

A 2011 survey by Cerulli Associates Inc. showed that 22% of advisers were below 40 and only 5% were younger than 30. The average age of advisers was 49.6, up one year from 2010. The average for wirehouse advisers was 50.6.

The total number of advisers fell to 320,378 in 2010, from 334,919 in 2004 — a 4.3% decline, according to Cerulli.

“You see the continuing graying of the industry,” said Tyler Cloherty, a Cerulli senior analyst. “There’s not a whole lot of new talent coming in on the low end. You’re going to see a shrinking of the advice industry.”

A report by the Bureau of Labor Statistics shows that the number of jobs for personal financial advisers is projected to grow by 66,400 by 2020, a 32% increase that is far larger than the 14% average growth rate for all occupations.

But filling those positions could be a challenge.

“There aren’t any people coming into the industry,” said Danny Sarch, president of Leitner Sarch Consultants Ltd.

A perception problem is dampening enthusiasm for financial management. Despite an increasing emphasis on fiduciary duty and holistic planning, jobs in the sector are perceived to be all about pushing financial products on clients.

“There’s an incredible stigma on sales from the younger generation,” said Michael Kitces, partner and director of research at Pinnacle Advisory Group LLC. “They don’t want to be a salesperson.”

According to industry observers, the financial management business hasn’t done a good job of explaining that it now is primarily about helping people meet their long-term financial goals.

“The knowledge of the industry from a [job] candidate standpoint is lagging behind what the industry actually is,” Mr. Patrick said.

The growing complexity of financial management also is contributing to the difficulty that firms — large and small — have in recruiting.

“There’s not a new generation of people coming up, because it’s much harder to make a living doing this,” said Randy Warren, chief investment officer at Warren Financial Service & Associates Inc.

Firms may be reluctant to hire college graduates with no experience because of the age difference between them and the clientele with which they will be dealing, he said.

“They have to realize that the bulk of the clientele is between 60 and 70,” Mr. Warren said. “They’re not going to trust a 22-, 24-, 28-year-old kid to manage their portfolio.”

Tom Sagissor, a regional director at RBC Wealth Management, concurs.

“While [he] may be incredibly capable, unless he’s joining a team, it is very difficult for a candidate right out of college to convince clients that they will be able to handle all of their finances,” Mr. Sagissor wrote in an e-mail.

The average age of RBC’s hires in fiscal year 2012 has been 38, he said.

The hollowing-out of training programs is another factor contributing to the lean talent pipeline, according to experts.

“When business is volatile, the first thing you cut is advertising,” said Craig Pfeiffer, president of Hohting Group LLC. “The second thing you cut is training.”

The wirehouses gutted their training programs following the financial crises in 2001 and 2008, according to Mr. Sarch.

“The industry has stopped training twice in the last 10 years,” he said. “They’re struggling to come up with the right formula, and I don’t think they have yet.”

Training is undergoing a fundamental transformation throughout the industry, according to Mr. Patrick.

Training periods are longer and expectations have been lowered so that recruits are given more time to build their own books of business.

The change at Raymond James was “revolutionary as opposed to evolutionary,” Mr. Patrick said.

The company, which trains classes of 70 to 100 recruits at a time, lengthened the program from four weeks to two years, established formal mentoring and now allows new hires to stay on salary for five years instead of three.

“We’ve extended the runway,” Mr. Patrick said. “It takes longer to establish relationships and open accounts than it did in the 1980s and 1990s.”

Bank of America Merrill Lynch has expanded its training program to 43 months, from 24 months, to allow trainees more time to earn a salary before they are expected to generate revenue on their own.

The move has helped increase retention for trainees who are licensed during the program to 42%, from between 28% and 36% in the period of 2000-2007.

About 24% of Merrill Lynch’s 16,000 advisers are over 55. At any given time, there are about 4,000 people in its training program.

During training, associates sit for the Series 7 and Series 66 licensing exams, take courses in the Certified Financial Planner Board of Standards Inc. curriculum and are paired with mentors in the field as they learn to work with clients and develop new business.

“By the time they get to graduation, they’re soaring,” said Dwight Mathis, head of Merrill Lynch’s new financial adviser strategy.

Morgan Stanley Smith Barney LLC has a 41-month training program and wants to hire 1,000 adviser associates this year, according to Christine Pollak, executive director of corporate communications.

UBS Wealth Management Americas has a four-year program that includes classroom and online instruction, as well as mentorships and branch work, according to spokeswoman Marina Aung.

Wells Fargo Advisors LLC de-clined to comment.

Like baby boomers’ retirement in general, the true impact of advisers’ retirement hasn’t yet hit. But when it does, it could reverberate.

“It’s going to be a very expensive problem to fix once it’s here,” Mr. Kitces said.

By Mark Schoeff Jr.

April 29, 2012


Some financial advisors are dipping their toes into the world of social media. But instead of worrying about accumulating massive numbers of Facebook friends and Twitter followers, says some social media experts emphasize quality over quantity. 

“I’m telling them to connect to people they know already, then pick and choose who the right people are,” Lauren Boyman, who is Morgan Stanley Smith Barney’s director of social media, tells the publication. “We’re telling them to do this in a methodical way. But we’re not instructing them to try and connect with Maria Bartiromo and see if that helps.”

 The idea is to find people who financial advisors may be able to do business with, not just adding friends, acquaintances, and family members for the sake of numbers.

For example, LPL Financial is asking its representatives to write targeted messages instead of drumming up marketing. “Content needs to be memorable and appropriate,” Melissa Fox-Foley, a vice president at the firm, says. “We’re not going for mass appeal.”

Firms are still grappling with the social media world, tracking how much it helps the bottom line, and coming up with ways to use social media in their businesses. And different financial advisor firms have very different rules on social media. Some allow their employees to have a little bit of freedom with what they write, while others require preapproval of tweets and comments.

In addition, there is the concern about what regulators will allow. But much like email used to be more strictly controlled by companies, experts like David Ballard of Advisor Group says that “there will be adjustments” as time goes on.

Written by Lisa Swan


Morgan Stanley Smith Barney is cutting some of its regions, reports. In an effort to streamline its business, the financial firm is going from 19 regions to 16, according to an internal memo.

Morgan Stanley’s Soundview region, which combines parts of Long Island and New York, is no more. The Long Island and Purchase locations are now considered to be part of the New York metro region, while the Connecticut offices are now part of Morgan Stanley’s New England region.

In addition, the North and South Florida complexes are being combined as one Florida region. And the Southeast region is now part of the Southern region.

This restructuring means that the four regional leaders whose territories were combined into other regions will be assigned to other positions within Morgan Stanley. There is no word at this time as to what their new jobs might be. 

Written by Lisa Swan


Robert McCann has been named the new chief executive officer of UBS Group Americas, InvestmentNews reports. McCann joined UBS AG in 2009 after leaving Merrill Lynch.

The pick of McCann seems to show that UBS is keeping its promise to move away from investment banking in favor of wealth management. And Karina Byrne, a spokesperson for UBS said that the appointment is “ a sign of the importance of the wealth management franchise to UBS and of the importance of Wealth Management Americas to the business.” She also said that it was “recognition of Mr. McCann’s hard work in turning around the wealth management franchise here.”

Ever since a London UBS trader cost the company $2.3 billion on its investment banking side, the firm has backing away from that part of the business. As for its wealth management division, UBS posted a 2% increase in profits in the third quarter, outdoing competitors like Morgan Stanley Smith Barney and Bank of America Merrill Lynch. In addition, UBS also hired 51 advisers, and showed a an average annual productivity of $895,000, the highest of the wirehouses.

“Our strategy around the world and in the Americas is centered on leveraging our leading Wealth Management franchise together with a strong and focused investment bank and asset management business,”  McCann told UBS employees in a memo. He replaces Philip Lofts in the position.

Written by Lisa Swan


UBS may have had a difficult financial quarter, between a tough financial environment, and the loss of $2.3 billion due to one of its trader’s shenanigans, but the company’s wealth management operations “were a notable bright spot in an otherwise dismal earnings report,” reports.

Robert McCann, head of UBS Wealth Management Americas, said in a memo to his staffers that even though the firm faced “reputational head winds,” UBS happened to be “in the midst of a meaningful turnaround.”

UBS showed more growth in wealth management earnings that its competitors Bank of America Merrill Lynch and Morgan Stanley Smith Barney did. While UBS isn’t close to reaching the $1 billion in profits goal that McCann set when he took over as CEO of UBS Wealth Management Americas in 2009, the revenue for the third quarter was $1.54 billion, which was a 2% increase from the previous quarter, and up 16% from last year’s third quarter.

The company also hired more financial advisors, picking up 51 over the third quarter, with 117 more than the previous year. They currently have 6,913 advisors. And for each advisor, UBS has $103 million in assets, more than any other such firm.

McCann wrote to staffers to congratulate them on “of the more impressive turnarounds I’ve witnessed in all my 30 years in financial services,” saying that UBS was “poised for even greater success.”

Writty by Lisa Swan


 Morgan Stanley Smith Barney is cutting down on its headcount, FundFire reports, shutting down 32 locations and listing 350 fewer advisors in the third quarter of 2011.

The bank is now down to 772 branches, and its financial advisor headcount has been reduced by 800 over the past year. FundFire says that this lower number is a combination of layoffs and advisors departing for other financial firms.

The banking powerhouse still has more financial advisors than anyone else, with 17,291 as of the end of last month, and has $175 billion in assets for separately managed accounts, the most in the business. But the company is seeing its revenue drop. Assets from customers with $10 million or more invested have dropped from $539 billion to $482 billion over the past three months.

In addition, the “annualized production per advisor” figure went from $785,000 on June 30 to $747,000 on September 30, and the “client assets per advisor” number dropped from $97 million at the end of the second quarter, to $90 million at the end of the third quarter.

A spokeswoman for Morgan Stanley blamed the current state of the economy for the lower figures.  Meanwhile, Merrill Lynch, the firm’s biggest competition, has added 475 financial advisors over the last quarter to reach a total of 16,722.

Written by Lisa Swan


Morgan Stanley Smith Barney is revamping its financial adviser pay structure to help raise its profit margin to 20 percent by encouraging brokers to bring in new business and sell more loans, industry sources said.

Executives of Morgan Stanley Smith Barney, a joint venture with Citigroup Inc. (C.N) briefed managers Friday on the plan, which also will slash pay for lower producers. Financial advisers are getting briefed on the plan this week, recruiters said.

The extent to which these changes cut or boost compensation costs will depend on the numbers of brokers who offset decreases in some areas with new incentives, recruiters said.

Head of the brokerage firm’s 51-percent owner, Morgan Stanley (MS.N) Chief Executive James Gorman, “seems to be dead set on hitting a 20 percent profit margin, and they’re not going to be able to do that without messing with compensation,” said recruiter Ron Edde of Armstrong Financial Group in Carlsbad, California.

Click link to view full article at Reuters

Written by Joseph A. Giannone – Reuters