Morgan Stanley will continue to cut branches in the United States as it integrates its overlapping outposts with Smith Barney, but hopes to expand in the rapidly growing overseas market, a senior executive for the brokerage said Friday.
“Growth outside the United States is going to be much more significant,” Charles Johnston, president of Morgan Stanley Smith Barney said Friday, a day after returning from tours of the firm's European outposts.
He did not give details of his plans, but said growth is likely to come “organically” rather than through acquisition since “there's not very much to buy” and the firm is still integrating Smith Barney. The joint venture, which will eventually give Morgan Stanley full control of the retail brokerage giant, went into effect last June.
He made his remarks following an address at the Securities Industry and Financial Markets Association's private client conference in New York. Sallie Krawcheck, president of
Bank of America's global wealth and investment management division, said on Thursday that the bank's Merrill Lynch unit also was expecting to grow rapidly overseas, particularly in emerging markets such as China, Indonesia, India and Brazil.
Morgan Stanley has already decreased its U.S. outposts from about 1,000 branches at the time of the merger with Smith Barney to 870 at the end of March. Mr. Johnston said that he aims to bring the number down to around 750 over the next few years as leases of branches end.
The firm is the world's largest retail broker, with 18,140 advisers as of March 31. Mr. Johnston repeated the firm's earlier remarks that it aims to keep a brokerage force of roughly 17,000 to 18,000 advisers.
Attrition was strong when the merger was first announced, particularly on the Smith Barney side where Mr. Johnston was president, but leveled off to record lows among the top 50% of brokers last quarter, he said. He also confirmed that many Smith Barney branch managers have left.
Mergers provide winners and losers and “the vast majority” who left lost their posts, he said.
In addressing the conference, Mr. Johnston recommended that retail brokerage executives address the difficult task of converting their brokers into full-fledged wealth managers because clients are clamoring for advice that goes beyond investing to
estate planning, debt management, risk management and help with generational wealth transfer.
“Clients want the full planning model,” he said, adding that the wealthier and more sophisticated they are, the more they are demanding it. What they're asking for from their advisers will become mainstream services over time, he predicted.
“It's a tough transition” for advisers, he said, citing a survey that estimated only 25% have adopted the broad model. He said that Morgan Stanley, whose advisers on average book about 30% of their revenue through traditional commission-based transactions, is investing heavily in training even its most experienced brokers on the new approaches.
Among the products it is urging them to offer are mortgages and other bank products that Smith Barney brokers are familiar with from their
Citigroup lineage but that is relatively new to Morgan Stanley brokers, Mr. Johnston said.
