Believe it or not, it's almost a year since the “joint venture” that we know as Morgan Stanley Smith Barney closed. From this outside perspective, with knowledge gained from talking to dozens of folks on the inside of the firm, it is a joint venture in title only: Morgan Stanley is running the show.
From the client perspective, MSSB adopted the Morgan Stanley commission schedule (more expensive than the Smith Barney schedule). MSSB adopted the MS policy of $1 million minimum account size to avoid “nuisance fees” (Smith Barney policy was $500,000). Branch Managers report to me that internal branch policies reflect Morgan Stanley legacy policies. For example, at Smith Barney, a Branch Manager had the ability to approve a “non-purpose loan” at the Branch level. At MSSB, the decision is now in the hands of credit people several layers up.
In other words, the Smith Barney folks are the ones undergoing the lion's share of the changes. There are two Morgan Stanley divisional folks and two Smith Barney divisional directors, but at the next level down, the regional level, there are more Morgan Stanley managers (12 Morgan Stanley Regionals and 8 Smith Barney regionals). When Jimmy Tighe, the MSSB Manhattan regional left to go to Merrill Lynch, he was replaced by Ralph Balzano, a Morgan Stanley regional from Connecticut. Balzano's spot was filled by Rich Less, a former Morgan Stanley regional who originally did not get a region when the first management structure was created.
Legacy Smith Barney managers also have it tougher when it comes to recruiting because the new technology platform of the combined firm, to be launched the second half of 2011, will be a Morgan Stanley based platform. Smith Barney Advisors are the ones who will have to learn a whole new system and move their clients over. So, if you are recruited into a Smith Barney branch between now and then, you will have to learn the Smith Barney system first, and the Morgan Stanley system in 2011.
In any industry, is it possible to create a new culture out of a merger this size? To me, it is crystal clear that this “JV” (as it is referred to internally) is really a takeover. There is no new culture; there is absorption of Smith Barney into Morgan Stanley. A Morgan Stanley manager put it to me this way: “Sarch, remember The Shawshank Redemption? I and many of my colleagues are ‘institutional men' like Brooksie. I don't think I can be as successful at any other firm. I have a comfort level here that comes from more than a decade at the same institution. It's not going to change.”
Perhaps this is the best way to run a giant retail brokerage firm. Maybe it's the best place to work, or maybe it's the worst. In either case, the script has been written. Advisors and Branch Managers alike can make their own judgment by staying or leaving.
When I asked that Morgan Stanley manager what advice he would give his legacy Smith Barney colleagues, he replied:
“They need to realize that this place is what it is. Embrace it or leave it. They need to learn from Andy Dufresne: ‘Get busy living, or get busy dying.'”
