Morgan Stanley in recruiting cross hairs

Merrill, others are determined to weaken stumbling giant by raiding advisers

Oct 7, 2012 @ 12:01 am

By Andrew Osterland

The two heavyweights of the wirehouse world are going toe-to-toe.

Bank of America Merrill Lynch and Morgan Stanley Wealth Management, the two largest wealth managers in the country, appear intent on taking advantage of each other's weaknesses and embarrassments to lure away top financial advisers.

“The weak attract the attention of the strong. Retail brokerage has a Darwinian dynamic,” said recruiter Danny Sarch, president of Leitner Sarch Consultants Ltd.

“The slowest in the pack get eaten,” he said. “If you have a group that is vulnerable, others will look to take them down.”


All Wall Street brokerage firms go through bad patches. BofA, for example, recently paid out more than $2.4 billion to settle a shareholder lawsuit alleging that it made false statements about the messy acquisition of Merrill in 2009.

However, Morgan Stanley seems to be lagging the pack lately. And competitors smell blood.

“Morgan Stanley is currently in the cross hairs of a lot of firms as an attractive recruiting target,” said recruiter Mark Elzweig.

The Wall Street Journal reported last Monday that Merrill management was providing its branch managers with lists of Morgan Stanley advisers to target for recruitment.

Merrill spokeswoman Susan McCabe declined to comment about the report, saying only: “We are highly selective in our recruiting and hiring, and we're equally focused on supporting and developing our existing advisers.”

If Merrill does have a Morgan Stanley hit list, it likely will target legacy Smith Barney brokers still unhappy with the joint venture commenced by former parent Citigroup Inc. during the financial crisis. Scores of Smith Barney managers who lost their jobs after the merger have landed elsewhere and are urging advisers with whom they had worked to join them, recruiters said.

All the nearly 17,000 advisers at Morgan Stanley have been suffering through a transition to the firm's new 3D technology platform. The complaints about system outages, problems with fund transfers between client accounts and issues with the customer relationship management system have been widespread.

Greg Fleming, head of Morgan Stanley's wealth management business, reportedly has been putting out fires across the country and assuring irate advisers that their concerns will be addressed and the problems fixed.

Morgan Stanley is taking a more systematic approach to protecting its adviser ranks from competitors and recruiters, Mr. Sarch said.

Insiders have told him that the firm is asking branch managers to assess the chances of the advisers they manage leaving the firm, labeling them high-, medium- or low-risk.

“The firms don't have systems to deal with brokers at risk,” Mr. Sarch said. “I think Morgan Stanley is taking a harder look at this and trying to determine what to do about it.”

The company has seen no spike in adviser departures of late, even top-quintile advisers, said Morgan Stanley spokeswoman Christine Jockle.

She also denied that Morgan Stanley management has asked branch managers for any adviser assessments beyond the usual.

“That information is inaccurate,” Ms. Jockle said. “We're not doing anything differently now then we have in the past.”


Certainly, managers are expected to know how happy or unhappy their advisers are and what issues they may have with the firm.

“A good manager is always assessing which advisers are at risk in their branch, and how to solve their problems,” said Frank LaRosa, president of Elite Recruiting & Consulting and a former Morgan Stanley Smith Barney LLC branch manager in New Jersey. “The issue is that Morgan Stanley isn't solving the problems and it's almost out of the control of the branch managers.”

Merrill may be targeting Morgan Stanley advisers more aggressively these days and Morgan Stanley may be working harder to keep disgruntled advisers in the fold. But the reality is that these two rivals will always be at war for advisers.

“Branch managers deal with it every day,” Mr. Elzweig said. “These two firms have been favorite hunting grounds for each other for years.” Twitter: @aoreport


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