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Morgan Stanley Drops Smith Barney From Name

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Morgan Stanley (MS) said early Tuesday that its U.S. wealth management business is now branded Morgan Stanley Wealth Management (MSWM).

The joint venture between Morgan Stanley and Smith Barney came together in 2009, with Morgan Stanley having a 51% share and Citigroup (C) 49%. Two weeks ago, the two parties agreed that Morgan Stanley could increase its majority ownership of the venture and assume full control by June 2015.

With the name change, Morgan Stanley executives praised the effort’s results to date, while experts gave it more mixed reviews.

“Today, as we move under one name, we are culminating a three-year effort to integrate two outstanding franchises,” said Morgan Stanley Chairman and CEO James Gorman, in a press release. “The Smith Barney name stood for investment excellence for three-quarters of a century, and Morgan Stanley Wealth Management will provide the first-class service that has distinguished Morgan Stanley as a firm for more than 75 years.”

The venture was valued at $13.5 billion on Sept. 11. It included about 16,930 employee advisors as of June 30 with some $1.7 trillion in assets. The number of advisors as of the second quarter dropped 2% from March 30 and 6% from last year.

“The name change was not unexpected,” said Danny Sarch, president of the recruiting group Leitner Sarch Consultants (which works with several key rivals of Morgan Stanley), in an interview with AdvisorOne. “Finally, we have the culmination of what was not a joint venture, but a takeover. The name change is representative of what we all know to be the case.’

Others see it a bit more positively. “It’s a smart branding move for Morgan Stanley,” said Chip Roame, managing partner of Tiburon Strategic Advisors (which lists Citigroup as a client), in an interview. “They spend so much on advertising. It’s smart to leave no consumer confusion between the MS brand used by all its businesses and the MSSB brand.”

Both experts agree that name changes are just part of the game plan when two firms are brought together. But they are more divided on how the overall integration and leadership of the combined firm is faring—and where it is headed.

While others have been critical of Morgan Stanley, Roame says he’s “more generous.” In fact, the consultant gives it a “B” on the integration.

“Integrations are never easy, especially of two prideful firms who thought they individually were doing things correct,” he said. “There are always naysayers, but I think this has been a smart two-step integration.”

Sarch offered an opposite view. “I predict the Harvard Business School could one day do a case study of this as one of the worst industry mergers over the years,” he said.

For Sarch, Gorman has led Morgan Stanley in ways that differ from his leadership style and decision-making at Merrill Lynch. Technology is one example. “In terms of the tech changes, publicly Morgan Stanley says they are all wonderful and nothing unexpected has happened. But privately, they’ve told brokers, ‘We will do better,’ and they keep coming out with fixes, so that indicates the real story,” he said.

“Going forward, I believe ultimately, they will fix the technology,” he continued. “But, as we’ve seen with this matter, those at the top of the organization believe in a certain way of managing, which is top down, away from the field, a McKinseyian approach.”

Roame—formerly of McKinsey & Co., the giant management consultancy—maintains Gorman and the management team are moving the firm in the right direction. “I think Morgan Stanley is led by a savvy, strategic guy in Gorman,” he said. “I am impressed by this move to acquire Smith Barney. I have read some comments by Greg Fleming on how he sees the business. I am impressed.” 

For his part, Sarch maintains this approach is not good for a brokerage firm. “Gorman, when he was with Merrill Lynch, one explained that his biggest fear in leading the industry’s largest sales force was that the experience of clients could vary so much from one advisor to the next. I think he took that concern over to Morgan Stanley,” he said.

“Thus, he thought, if you create certain rules on pricing and other procedures, then you are taking more [decision-making] out of the hands of advisors—because ultimately you don’t trust them. That crates a culture that is both acceptable to some and unacceptable to others.”

This debate, of course, will continue to play out over the coming years—and the coming financial reporting seasons. Morgan Stanley had a 50% drop in second-quarter profits, so analysts and other observers are looking for sharp improvement.


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