More On Legal & Compliancefrom The Advisor's Professional Library
- Preventing and Dealing with Client Complaints Although the SEC has not provided specific guidance on how client complaints should be handled, a firms policies and procedures should provide clear direction how to do so, as neglecting complaints can exacerbate a bad situation.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Morgan Stanley (MS) has the government’s thumbs-up to buy the final 35% stake in its Morgan Stanley Smith Barney joint venture from Citigroup, the company said early Friday.
“This is a historic day for Morgan Stanley,” said Chairman and CEO James P. Gorman, in a press release. “Immediately upon closing, we expect to start seeing the benefits of 100% ownership—including an expanded deposit base, unique syndication and distribution capabilities and enhanced opportunities for both our wealth management and institutional clients.”
Morgan Stanley says it will pay $4.7 billion in cash for this last slice of the joint venture and expects the deal to close by June 28.
The joint venture between Morgan Stanley and Smith Barney came together in 2009, when Morgan Stanley acquired a 51% share (for $2.7 billion) and Citigroup (C) 49%. At the time, the combined entity—Morgan Stanley Smith Barney—had some 18,500 advisors.
In September, the two parties clashed over the valuation of the deal, which was put at $13.5 billion, much lower that Citi’s estimated value of $22 billion. It included about 16,930 employee advisors as of June 30, 2012.
After an agreement was reached, Morgan Stanley bought an additional 14% stake in the venture and changed its name to Morgan Stanley Wealth Management, which had about 16,300 advisors as of March 31.
(As part of its second-quarter ’13 earnings, Morgan Stanley will record a negative capital adjustment of about $200 million, net of tax, which reflects the difference between the purchase price and its carrying value.)
“Today, the power of Morgan Stanley’s platform—a premier investment bank and one of the world’s pre-eminent wealth and asset management franchises—is clearer than ever before,” explained Gorman (right), in a statement. “With this milestone behind us, we have added momentum to carry out our full plan to achieve higher shareholder returns.”
Rival broker-dealers have been recruiting Morgan Stanley advisors at a steady pace. But while the number of Morgan Stanley reps departing in 2011 and 2012 shot up due to IT-related issues, “It’s significantly better and stable in 2013,” said Rick Peterson, a Houston-based recruiter, in an interview.
Plus, Peterson says, the wirehouse just seems to be having its fair share of departures, “and if these reps are replaced by those with bigger [asset and production] numbers, they really don’t mind.”
Last week, for instance, Morgan Stanley said it recruited three advisors from rival wirehouse firms with a total of $3.7 million in yearly fees and commissions. The broker-dealer says that attrition among the top two quintiles of advisors remains "very low."
See where Morgan Stanley placed in 12 Best & Worst Broker-Dealers: Q1 Earnings, 2013 on AdvisorOne.