Morgan Stanley Wealth Management, the largest brokerage firm by number of advisers, has ceded some ground in the past year as its head count slipped to 15,771, the lowest since the unit was united with Smith Barney in 2009.
That drop comprises a 3% decline in overall head count from June 2014, when the firm had 16,316 brokers. The firm lost 144 advisers in the past quarter alone, according to its
second-quarter earnings report released Monday.
“It is a big number,” said Alois Pirker, a research director for Aite Group's wealth management consulting unit. “And I haven't seen that happening at the other [wirehouses].”
The decline at Morgan Stanley narrows its lead compared to its wirehouse competitors by size of the brokerage force.
Bank of America Merrill Lynch, which began turning around its outflows last year, said it had added 187 advisers last quarter for a total of 14,370.
Bank of America's chief executive officer, Brian Moynihan, said on a conference call with analysts last week that the firm was
sacrificing profitability in order to focus on building head count.
Wells Fargo Advisors, which includes
Wells Fargo Financial Network, a unit of independent financial advisers, and bank channel advisers, reported it had also increased head count slightly and had 15,151 advisers at the end of the second quarter.
GORMAN COMFORTABLE WITH BUSINESS
Morgan Stanley executives did not elaborate on the decline in a conference call, despite a question from one analyst, Christian Bolu of
Credit Suisse, who asked if Morgan Stanley might be interested in an acquisition, given that “adviser growth remains weakened.”
In response, Morgan Stanley's chief executive officer, James Gorman, said that while he could not discuss the possibility of any deals, he was “comfortable” with the size of the business and that he saw more opportunity to grow organically, particularly through added emphasis on banking, which has been a growing force in wealth management as advisers sell more loans.
“We're very comfortable with the business we have and the size of the business,” Mr. Gorman said on the call. “We are really and truly at scale.”
Morgan Stanley spokeswoman Christine Jockle said the declines were a result of the shedding of lower-producing advisers. Indeed, the average annualized revenue per broker ticked up 8% year-over-year to $978,000, from $905,000. The firm also boosted its profit margin to 23%, well within Mr. Gorman's target of 22% to 25% by year-end.
In addition, attrition of the firm's top-ranked advisers “remains very low,” Ms. Jockle said.
ASSEMBLING TOP PRODUCERS
“It's more of defending the people you want to have sort of thing,” Mr. Pirker said. “In the land of the wirehouses, the game has become assembling a collection of top producers.”
Still, continued declines could prove unsustainable and eventually cut into those performance metrics, Mr. Pirker warned.
“You start cutting into the flesh at some point,” Mr. Pirker said. “Right now things are OK, but at some point you start losing top performers and then you start seeing the indicators drop as well.”
At least 19 teams managing some $3.8 billion in assets left the firm in the second quarter, according to
InvestmentNews' Advisers on the Move database. That number includes a $2.4 billion departure to
Raymond James Financial Inc. The firm meanwhile brought in just six teams with around $1.8 billion in assets, according to the database.
Morgan Stanley also saw a 3% decline in the number of branch locations, which fell to 618 from 636. Executives have said in previous earnings calls that the firm is still in the process of consolidating leases on redundant branches.
Overall, Morgan Stanley Wealth Management's assets under management stood at $2.03 trillion, up 2% from $2.002 trillion a year ago.
