Heads still rolling at MSSB

Heads still rolling at MSSB
Morgan Stanley in the third quarter continued to cut the number of financial advisers in its joint venture retail brokerage, Morgan Stanley Smith Barney.
NOV 14, 2011
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 in a conference call with analysts this morning. Mr. Gorman 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 down 752 since the beginning of the year. “Greg Fleming [head of retail brokerage] is focused on expenses discipline and management. One example is the reduction in the number of financial advisers,” Morgan Stanley chief financial officer Ruth Porat said during the call. “He's focused on reducing the number of less productive FAs and that brings some cost savings.” (For a look at the third quarter financial adviser headcounts, assets and productivity at MSSB, Wells Fargo and Bank of America-Merrill Lynch, click here.) The reduced number of advisers didn't make up for the difficult market. Average revenue per adviser fell 5% in the third quarter to $747,000. That figure, however, is up 9% from the same quarter last year. 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 yesterday, 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 the same quarter last year. The full profit of MSSB was $221 million, with $169 million of that attributable to Morgan Stanley. And the division had a pre-tax profit margin of 11%. Morgan Stanley as a whole would have earned just 2 cents per 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'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% so far 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.”

Latest News

Dimon and Trump talk economy and Fed rates as meetings resume
Dimon and Trump talk economy and Fed rates as meetings resume

President meets with ‘highly overrated globalist’ at the White House.

NASAA moves to let state RIAs use client testimonials, aligning with SEC rule
NASAA moves to let state RIAs use client testimonials, aligning with SEC rule

A new proposal could end the ban on promoting client reviews in states like California and Connecticut, giving state-registered advisors a level playing field with their SEC-registered peers.

Could 401(k) plan participants gain from guided personalization?
Could 401(k) plan participants gain from guided personalization?

Morningstar research data show improved retirement trajectories for self-directors and allocators placed in managed accounts.

UBS sees a net loss of 111 financial advisors in the Americas during the second quarter
UBS sees a net loss of 111 financial advisors in the Americas during the second quarter

Some in the industry say that more UBS financial advisors this year will be heading for the exits.

JPMorgan reopens fight with fintechs, crypto over fees for customer data
JPMorgan reopens fight with fintechs, crypto over fees for customer data

The Wall Street giant has blasted data middlemen as digital freeloaders, but tech firms and consumer advocates are pushing back.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.