Morgan Stanley Smith Barney is laying off between 200-300 lower-level advisors, a company source who requested anonymity confirmed late Wednesday. It is also considering changing the name of the group and dropping “Smith Barney,” according to Dow Jones and Reuters.
The job cuts generally affect lower-producing advisor trainees with three years or less of experience and $25,000 yearly fees and commissions, and those with five years or less of experience and $75,000 a year in production.
As of Dec. 31, 2010, MSSB included 18,043 financial advisors, down 1% from 18,135 a year earlier, and off slightly from 18,119 in the third quarter of 2010. Morgan Stanley, now led by Merrill Lynch-veteran James Gorman, who joined the company in February 2006, reportedly hired some 2,000 trainees last year.
Average revenue (or gross production) per advisor stood at $742,000 as of the fourth quarter, an increase of 7% from $692,000 a year before and 6% from $686,000 in the third quarter.
By contrast, MSSB rival Merrill Lynch had 15,498 registered reps at year-end, an increase of 327 advisors over the fourth quarter of 2009 and 22 more than in the third quarter of 2010. Average annualized production per FA was $854,000 for 2010 and $916,000 for the fourth quarter.
“This is a high overhead business, and major wirehouses want to cut their losses early,” said Mark Elzweig (right), an executive search consultant in New York, in an interview with AdvisorOne. “If a trainee can't make it happen pretty soon, they'd rather take a shot with someone else.”
Morgan Stanley also is reportedly considering dropping "Smith Barney" from the name of its advisor force, Dow Jones reported Wednesday. (The company would not comment on the report.)
The six new names being considered for the unit, formed two years through a joint venture, are: Morgan Stanley Advisors, Morgan Stanley Private Wealth Advisors, Morgan Stanley Global Wealth Advisors, Morgan Stanley Wealth Advisors, Morgan Stanley Wealth Management and Morgan Stanley Global Wealth Management.
“That's typical in acquisitions,” explained Elzweig (left). “It's all one big happy family for the first year of the exciting new partnership where the great ‘synergies’ between the firms are touted. A year later, many of the acquired firm's senior management are taken out, and the acquired firm's name is unceremoniously dumped.
“Remember Shearson Lehman Hutton, Smith Barney Shearson and UBS Paine Webber?” said Elzweig.
In mid-January, Charlie Johnston, the co-president of MSSB and former head of Smith Barney said he would retire at year-end. Greg Fleming, another Merrill Lynch veteran like Gorman, was tapped as the new head of global wealth management.
MSSB is still 49% owned by Citigroup.