Morgan Stanley CEO is happy that brokers are staying put

Firm has seen little attrition since it dumped the broker protocol last fall, Gorman says

Jul 18, 2018 @ 1:48 pm

By Bruce Kelly

James Gorman, CEO of Morgan Stanley, loves life at his firm eight months after it dumped an industry agreement called the protocol for broker recruiting, which makes it easier for advisers to leave to join another broker-dealer.

For decades, competition for broker and adviser recruits drove growth strategies at Wall Street firms like Morgan Stanley.

That changed last year. In the spring of 2017, Morgan Stanley, Merrill Lynch and UBS Financial Services said they were reducing their reliance on recruiting experienced advisers with big signing bonuses and instead making changes that would emphasize building staff in-house. Then in October, Morgan Stanley said it was leaving the recruiting protocol, with advisers being told that the firm would enforce client confidentiality and non-solicitation agreements.

Mr. Gorman made plain his distaste for recruiting, which is costly and time-consuming, during a conference call Wednesday morning to discuss the firm's second-quarter earnings.

"I've sort of watched this for about 25 years," he said, calling brokers moving from firm to firm a "kind of crazy, weekly event" that occurred in the past.

After years of widespread industry consolidation, advisers jumping from firm to firm for a recruiting bonus is less prevalent, Mr. Gorman noted.

"Now there's basically 3½ or four big firms, and the amount of recruiting they're doing from each other is very small, and it's small for good reason though," he said in response to a question about Morgan Stanley's perception of the market for financial adviser recruiting. "We don't need to recruit a lot of people. We're growing organically. We're very comfortable with that."

To Mr. Gorman's point, the number of advisers at Morgan Stanley has been stable. Wednesday the firm reported 15,632 advisers under its roof; a year ago, the firm reported 15,777 advisers. In the past 12 months, Morgan Stanley's adviser head count has declined less than 1%.

During the second quarter, advisers produced an average annualized revenue of $1.1 million.

"It's probably the first time Morgan Stanley has seen these low levels of attrition in a decade or more," said Casey Knight, an industry recruiter. "The firm must be excited about stopping the bleeding from the high-cost recruitingdeals.That will help the bottom line."

Mr. Gorman acknowledged the movement of some advisers at Morgan Stanley and other wirehouses to set up their own independent RIAs.

"There's always that prospect of somebody setting up a boutique on their own," he said. "But that's where the power of the franchise, the quality of the research, the capability, the technology, the expense, the compliance, all of these things lead people to want to be part of an institution like ours."

Morgan Stanley has seen "very little attrition, and as a result, we are doing very little recruiting," Mr. Gorman said. "We like growing in-house and we're doing that successfully, and clearly, it's an economically much better proposition."


What do you think?

View comments

Recommended for you

Featured video


What it took to win an Excellence in Diversity & Inclusion Award

Editor Fred Gabriel and special projects editor Liz Skinner explain how InvestmentNews chose the winners of our inaugural Excellence in Diversity & Inclusion Awards.

Latest news & opinion

Tax-credit investigation may trip up Wells Fargo

Justice Department is investigating bank's dealings in tax credits for low-income housing, sources say.

10 biggest boomtowns in America

These metro areas are seeing the biggest influx of people, work opportunities and business growth.

SEC ponders creating video to help investors decide between investment adviser and broker

Chairman Jay Clayton has suggested the host on the video would deliver similar information as conveyed on disclosure Form CRS.

Genworth raises long-term-care insurance costs an average 58%

The cost increases, approved by regulators in the second quarter, affect roughly $160 million of in-force premiums.

Registered reps, firms in brokerage industry decline: new Finra report

Regulator publishes first-ever snapshot of sector it oversees.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print