Morgan Stanley joins competitors in cutting back on recruiting

Wirehouse said it intends to increase its investment in existing talent.
MAY 23, 2017

In a significant break from Wall Street tradition, Morgan Stanley is joining its competitors in reducing its reliance on recruiting experienced advisers. In an internal memo viewed by InvestmentNews, Morgan Stanley on Tuesday outlined the changes that would emphasize building staff over recruiting. It will focus in the future on digital platforms, teams of advisers and making its branch officers more efficient. The memo was sent to Morgan Stanley's regional directors and branch managers from Shelley O'Connor and Andy Saperstein, co-heads of wealth management. "Going forward, we intend to increase the investments and resources supporting our existing talent and platforms even further and significantly reduce experienced adviser recruiting," the memo said. "Specifically, we will honor agreements with recruits that are fully approved and in our pipeline by June 16 and have a start date no later than September 1, subject to our normal background and diligence process. We will develop new recruiting policies consistent with our objectives in the coming weeks." For decades, recruiting large producing brokers or large teams of brokers has been the lifeblood of many retail brokerage firms. The downside for firms is the large expense that comes from huge signing bonuses, which traditionally have been two to three times a broker's annual revenue, known as gross dealer concession in the industry. But wirehouses like Morgan Stanley have been pulling back from large compensation for recruits since last October, when the Department of Labor issued guidance about its fiduciary rule for retirement accounts. Specifically, hiring incentives such as recruiting bonuses could be contrary to the rule because they can contain sales targets. Big firms almost immediately cut their bonuses to recruits. Merrill Lynch earlier this month made an announcement, stating that, as of June 1, the firm will step away from the traditional adviser recruitment model, no longer offer signing bonuses for experienced advisers who have at least eight years of industry experience. At the same time, Merrill Lynch launched a pilot program to focus on recruiting and training younger advisers as a way to grow its wealth management business. Last year, UBS Wealth Management Americas announced a new adviser compensation plan and said it was going to cut back on recruiting by 40% and shift its focus toward retaining top-producing advisers. Morgan Stanley intends to focus on investing in its current staff, according to the memo. It also intends to hire "hundreds" of additional wealth adviser associates and digital advisor associates in order to buttress its branch offices, according to the memo. "Our commitment is backed by the major investments we are making to help our advisers grow their businesses by deepening and broadening their client relationships and delivering holistic advice built around client goals," according to the memo.

Latest News

Stocks rebound as Fed provides more certainty of uncertainty
Stocks rebound as Fed provides more certainty of uncertainty

Jerome Powell's tone calmed investor nerves short term, but left ambiguity.

Osaic network expands with $170M AUM trio of advisors in Indiana
Osaic network expands with $170M AUM trio of advisors in Indiana

Industry veterans make the switch having been part of an association of firms.

Nvidia could be about to spend big on US tech drive
Nvidia could be about to spend big on US tech drive

Latest chips can be made in America, CEO tells FT.

Copper breaks $10K threshold amid tariff threats
Copper breaks $10K threshold amid tariff threats

Traders are anticipating new levies from next month.

'Beautiful, clean coal' could get a major boost from Trump team
'Beautiful, clean coal' could get a major boost from Trump team

Emergency powers could bring back shuttered plants.

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies