Wirehouses: Just Say No to Disclosing Broker Headcounts
In a sign of shifting wirehouse priorities, two of the largest, Merrill Lynch and Morgan Stanley Wealth Management, last week made it harder to track exactly how many advisors work in their full-service brokerage units each quarter.
Morgan Stanley went a step further and eliminated entirely the broker count at its wealth management business, which a spokeswoman would only quantify as “around 16,000,” including its core advisor-led force and several hundred call center brokers it acquired with E*Trade Financial.
The changes highlight firms’ shifting business models, which have moved away from commission and investment sales in favor of growing fee-based assets, cross-selling customers on banking relationships and metrics that are less dependent on simply filling seats, according to Michael Wong, Morningstar Research Services’ director of equity research.
“The size of the broker salesforce used to be a key indicator of the health of the business and capacity to generate more commissions,” Wong wrote in an email following up a phone interview on the topic. “In the era of selling customers on more than just commissionable trades, firms are hoping to focus shareholders on net new assets, new accounts, fee-based assets, loans to wealth management clients, and other metrics.”
In discussing first quarter reports last week, both Merrill and Morgan Stanley executives de-emphasized the importance of individual broker counts to their overall enterprises.
“We think about our wealth management business across this full continuum of offerings,” a senior Merrill Lynch executive said of the blended headcount figure. “And we increasingly see our advisor talent moving across the continuum.”
At Morgan Stanley, the change comes as it expands beyond its core brokerage roots into areas such as self-directed brokerage and corporate stock plan services with its fourth quarter E*Trade acquisition.
“Once upon a time, when we had just the core business, that number of financial advisors and productivity per financial advisor were basically the only two metrics you needed to follow. And now we’ve got like 30 different things that are bobbing along,” Morgan Stanley Chief Executive James Gorman told analysts in a call on first quarter earnings. The emphasis on the larger metric pool reflects “a very different view of the wealth management business,” that his bank has adopted, Gorman said.
Wirehouses, to be sure, have been de-emphasizing headcount in recent years, as they have been contending with an increase in veteran broker retirements, attrition to independent or registered investment advisory channels, and challenges in graduating the next generation of trainees.
Merrill’s sales force had been declining for several quarters before it took the initial step in 2019 of combining its roughly 14,600 core brokers with 2,600 Merrill Edge consumer brokers–while still reporting private bankers separately.
“The inexorable trend is that the number of advisors in the industry is decreasing,” said Danny Sarch, a brokerage industry recruiter based in White Plains, New York.
Bill Willis, an industry recruiter in Palos Verdes Estates, California, said he suspects wirehouses have stopped the precise reporting exact headcounts because their executives are “tired of competing this way,” particularly as firms have become “murkier” about what’s actually included in the numbers or whether they’ve added advisors from other channels to bolster their reported rosters.
The other two wirehouses, Wells Fargo Advisors and UBS Wealth Management USA, have also made changes in recent years that make it harder to track headcount changes as their advisor forces have shrunk.
Wells Fargo, which had lost over 2,000 brokers net since its parent company’s fake account scandal in 2016, has for the past two quarters reported an advisor tally of around 13,500 brokers that includes around 900 “financial and wealth advisors” who had been overseen by the consumer bank but were merged into the core private client group in the fourth quarter.
UBS for the past several years has reported only an ‘Americas’ headcount figure of around 6,000 brokers, including several hundred in Latin America and Canada. UBS had previously seen years of sequential declines that brought the tally down from around 8,000 brokers a decade ago, although executives have said that the declines are in part by design as it focuses on a smaller number of advisors with higher average productivity.
Still, Morningstar’s Wong said that the push deprives shareholders of some key transparency.
“Is it less meaningful than it used to be? Sure. Is it something that I would like to know? Yes,” Wong said.
Advisor headcounts continue to help “signal changes in market share,” Wong said, “and the wirehouses have been on the losing end of the market share shift for the past decade or more.”
If Bank of America or Morgan Stanley are significantly increasing self-directed platforms and adding less than full-service FAs, who are paid less, Wong said, “it could change their operating margins.”