Behind the defection infection at MSSB

Recent exits by some top teams underscore the discontent with the new regime

Jul 22, 2012 @ 12:01 am

In the near future, the Smith Barney name will disappear below the horizon, following its culture, which has long been swallowed up within Morgan Stanley. The final Smith Barney offices recently converted to the new “3D” technology, while senior management apparently is planning another round of layoffs and consolidation.

The trade press continues to report on large defections from Morgan Stanley Smith Barney LLC. This diaspora may be a result of the culture change or possibly a decrease in service levels to the adviser. Or maybe senior managers have failed to show an understanding of what their own advisers do every day.


For example, built within the new technology is a sophisticated price metrics system. It analyzes typical fees and commissions charged to clients all over the country.

By all accounts, it is a useful tool. But picture this scenario: Joe Adviser gets a referral from his attorney friend Mary about a big estate liquidation. They feel there's a good chance that the family will establish a long-term relationship with Joe.

Mary tells Joe, however, that he needs to discount the initial trades severely to win the business. That discount gets rejected by the price metrics analytics. Attempts to override the system with human beings also fail. In a culture where you have watched colleague after colleague disappear, saying no is easier than saying yes.

MSSB spokesmen all say the unit has a robust recruiting pipeline and is bringing in more production than it is losing. Publicly, they tell everyone to stay calm, that all is well with the conversions, with the new systems, with the culture. Picture Kevin Bacon at the end of “Animal House” screaming: “All is well!”

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