Morgan Stanley continues to prune reps
Morgan Stanley in the third quarter continued to cut the number of financial advisers in its joint venture retail brokerage, Morgan Stanley Smith Barney LLC
Morgan Stanley in the third quarter continued to cut the number of financial advisers in its joint venture retail brokerage, Morgan Stanley Smith Barney LLC.
“We are not focused myopically on our size but on the returns we generate for shareholders,” chief executive James Gorman said during a conference call last week.
He was speaking about the entire firm, including investment-banking activities and institutional businesses that could be affected by regulatory changes. But the sentiment clearly applies to the retail brokerage business, as well.
The firm ended the quarter with 17,291 advisers, down 347 from the previous quarter and 752 since the beginning of the year.
“Greg Fleming [head of retail brokerage] is focused on expenses discipline and management,” Morgan Stanley chief financial officer Ruth Porat said during the call. “One example is the reduction in the number of financial advisers.”
The lower number of advisers didn’t make up for the difficult market.
Average revenue per adviser fell 5% in the third quarter from the second quarter to $747,000. That figure, however, is up 9% from a year earlier.
Total client assets dropped 8% in the quarter to $1.56 trillion, despite new-client-asset inflows of $15.5 billion — the biggest quarterly inflow since the inception of the joint venture, according to Ms. Porat.
As was the case with Bank of America Corp., which reported earnings last week, wealth management was a bright spot in a difficult quarter for Morgan Stanley. Revenue from the division totaled $3.3 billion, down 8% from the second quarter but up 3% from a year earlier.
The full profit of MSSB was $221 million, with $169 million of that attributable to Morgan Stanley. And the division had a pretax profit margin of 11%.
Morgan Stanley as a whole would have earned just 2 cents a share, excluding a $3.4 billion accounting gain from the falling value of the firm’s own debt.
Mr. Gorman reiterated his intention to buy Citigroup Inc.’s minority stake in MSSB. Morgan Stanley has a call option to purchase another 14% share of the joint venture by the end of next May.
With Morgan Stanley’s stock down 40% this year, however, how he will pay for it remains to be seen.
“We intend to own this business,” Mr. Gorman said. “The stock is not where we think it should be, but May is a long way off.”
Email Andrew Osterland at [email protected]
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