Morgan Stanley Execs: Broker Attrition Sinks, Offsetting Recruiting Drought
Morgan Stanley Wealth Management “only recruited a handful of people” in the first quarter but its executives said Wednesday that incredibly low attrition rates have kept its brokerage force strong and productive.
Attrition among its force of more than 15,600 brokers hit a record low 1.8% during the first quarter, a company spokeswoman said after the company’s chief financial officer discussed recruiting policies and productivity during an earnings call of Wednesday.
The percentage of advisers who left “to the competition” was an even lower 0.3%, she said..
Morgan Stanley did not discuss the reasons for its success in retaining advisers, at a time when it has pulled back on expensive recruiting, but it appears to be succeeding through sticks as well as carrots such as deferred bonuses.
Its most punitive strategy centers on its exit from the Protocol for Broker Recruiting last November, making it more difficult for brokers to leave with confidence they can restart their practices at rival firms. It cemented that strategy with courtroom efforts to prevent some brokers who left from calling their former customers. As recently as Tuesday it filed a motion for a restraining order against a New Jersey broker.
“What we’ve seen to date this year is a significant slowdown in the number of people who left,” Chief Financial Officer Jonathan Pruzan said on a conference call Wednesday after Morgan Stanley reported a better-than-expected 40% jump in first-quarter profit and a 19% boost at its wealth unit.
Pruzan also said that brokers who did leave in recent months generally had “quite low” production numbers.
The firm lost a net 30 brokers in the first quarter of 2018, ending on March 31 with 15,682 advisors—still the largest salesforce among the four big “wirehouse” broker-dealers.
Morgan Stanley, along with Merrill Lynch and UBS Wealth Management Americas, in the past two years also has squeezed its recruiting budget, making retention a major priority.
“We have only recruited a handful of people over the first quarter,” Pruzan said.
Merrill Lynch on Monday also boasted record-low attrition levels among its almost 15,000 brokers. It didn’t break out the number, but people familiar with its wealth business said the figure was about 2% overall during the first quarter.
Morgan Stanley chief executive James Gorman, who engineered Morgan Stanley’s big bet on retail brokerage by buying Smith Barney following the financial crisis of 2008, emphasized on the earnings call that he is more interested in the quality than the quantity of the firm’s brokers.
“I’d focus on the total assets and assets per advisor more than the number of advisors,” he said. “[Y]ou won’t see a radical shift in numbers.”
Average customer assets per Morgan Stanley advisor reached $151 million by the end of the first quarter, up 9% from $129 million a year ago. Production, commissions and fees that brokers collected from customers, climbed to an annualized $1.12 million based on first-quarter production, up from $1.03 million a year ago.