MSSB castoffs 'attractive' to other firms

By Andrew Osterland

Mar 13, 2011 @ 12:01 am (Updated 9:12 am) EST

Bloomberg

The 200 to 300 financial advisers and trainees given their walking papers at Morgan Stanley Smith Barney LLC this quarter probably won't have much trouble finding new jobs, according to industry recruiters.

With firms from Edward Jones to Robert W. Baird & Co. Inc. looking to add hundreds of advisers to their ranks (see story on Page 10), the recently released brokers at MSSB should line up work quickly.

“Any adviser from one of the major firms is an attractive candidate for the other firms in the industry,” said Tim White, managing partner of recruiting firm Kaye Bassman International Corp. “It's always been true and it will remain so. If you have a book of business, firms want you.”

The advisers leaving MSSB are trainees bringing in less than $25,000 in fees and commissions for the firm or full advisers bringing in less than $75,000, according to a company spokesman. That's not exactly a dream hire for a regional firm, community bank or insurance company. Nevertheless, the opportunities will still be there.

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“There are firms out there that pride themselves on taking a $75,000 producer and turning him into a $300,000 producer,” said Mitch Vigeveno, a recruiter with Turning Point Inc.

Mr. Vigeveno suggests that wirehouse castoffs should consider community banks and insurance companies as a potential landing place.

“The issue for those who don't make the cut at the wirehouses is usually about prospecting,” he said. “If that were the case and I wanted to stay in the business, I'd look for a situation where a firm is strong in a niche market where the prospecting is likely to be easier.”

Mr. White also thinks that the opportunities for young advisers let go from the wirehouses in this environment are still good.

“If you're a rookie in the business, the last two years could have been among the worst to have started your career with. Probably most if not many of them could be successful in the industry under different circumstances,” he said.

For Morgan Stanley and its 18,000-plus adviser force, the departure of 300 people is a small drop in a very large bucket. In a normal year, the firm will see adviser turnover of around 10%, according to a spokesman at the firm. Many of them leave for other wirehouses or independent firms; others are axed because of low production numbers, as was the case last week.

The high fixed costs of the large Wall Street firms, and the constant pressure for growth from public shareholders demand that the firms aggressively manage their workforce. The constant culling of low-end producers and the continuous search for talented advisers to replace them is a fact of life for wirehouses — and their employees.

However sensible pruning for productivity may be, it doesn't work if the firms can't keep the top producers happy. It takes a lot of cuts of advisers making $75,000 in fees and commissions to make up for the loss of one adviser contributing more than $1 million to a firm's bottom line.

MSSB, for example, lost a team to UBS last week that oversaw $1.1 billion in assets, and brought in $4 million in revenue for the company.

Of course, that's not the end of the world for a brokerage as large as MSSB, which is continually hiring high-producing teams. In February, for instance, Morgan Stanley snagged a pair of advisers from Bank of America Merrill Lynch that had nearly $400 million in assets under management

“We're giving as good as we get on the recruiting front,” said James Wiggins, a spokesman for Morgan Stanley Smith Barney. “It will become clear in due course.”

Still, many recruiters expect to see more departures ahead for Morgan Stanley, particular from its Smith Barney side of the business.

“Most of the disquiet has come from the Smith Barney advisers. A lot of the management people that supported that practice have moved on or are leaving,” said Mr. White. “I don't think we've seen the end of the bloodletting yet.”

E-mail Andrew Osterland at aosterland@investmentnews.com.