Morgan Stanley Staff Losses Could Be Way In

Say what you will about the troubles at Morgan Stanley. Just don't be too short-sighted. Now might be the right time to plot a hiring strategy into the House of Morgan.

Sure, it's easy to be spooked by the continued exodus of top talent from Morgan Stanley in recent weeks: more departures are expected as eight retired Morgan Stanley bankers continue their public campaign to oust CEO Philip Purcell.

Recruiters are split, however, over whether the firm's culture wars should keep jobseekers away entirely.

Until now, Morgan Stanley has been hiring mostly from within to fill spots opened by the recent walkouts. The firm suffered a fresh round of senior departures late last week as the head of its U.S. cash equities business quit along with a team of seven traders to join rival Deutsche Bank. Earlier, top bankers Joe Perella and Terry Meguid also quit, and Thomas Juterbock, Morgan Stanley's head of U.S. government bond trading, walked out after 20 years with the firm.

Almost all were replaced from within. A Morgan Stanley spokesman says, 'We have a deep bench of talent that will lead the business going forward.'

How Long Can This Go On?

Richard Stein, senior client partner and head of capital markets at Korn/Ferry International in New York, says it's time for Morgan Stanley to start diversifying its talent gene pool.

Even before the flap over Purcell's leadership, he says, Morgan Stanley had been promoting internally to fill top openings, while other firms such as Deutsche Bank have been poaching-and growing-briskly.

The lack of new blood from outside Morgan, Stein says, has bred a sense of complacency and entitlement among senior managers at the firm, and has put Morgan at a competitive disadvantage. 'It's a good opportunity for Morgan Stanley to recruit, even though integration (of new people) might be difficult now because of the fight at the core of the culture over who the firm is, Dean Witter or Morgan Stanley,' Stein says. 'If I were advising Phil Purcell, I'd say Morgan Stanley needs to be on the offensive and needs to look at where the puck is going - not where it has been.'

For jobseekers, timing is all. Recruiters say it may be another three to six months before the shakeup will resolve itself, and the storms within Morgan for anyone going in now may make it hard to get anything done. One recruiter, who counts Morgan as a client and requested anonymity, says if the bank keeps losing staff it will be hard for Purcell to achieve the growth numbers he needs to stay on. 'My advice to those looking?' he asks. 'Taking a new job always has risk and it could be a great opportunity coming into Morgan Stanley today, regardless, but it would be dicey.'

The good news? Recruiters say the bank needs to address rebuilding itself. All the current internal movement will eventually lead to openings at the bottom, along with those key positions that will have to be filled at the top. 'Morgan has a deep bench of talent and this whole thing is pushing people ahead, up the ladder, faster than it would have been otherwise,' says Gary Goldstein, CEO of search firm The Whitney Group. 'This is creating room for the next generation of MDs.'

That means openings down the road in the junior ranks, which recruiters say will have to be filled from the outside at some point-and undoubtedly at premium pay given the bruising Morgan is taking in the marketplace.

Look Now, Leap Later

Rod Williams, New York City Job Market Consultant for Lee Hecht Harrison, a career and leadership consulting firm, says positioning yourself now may carry huge payoffs in the months ahead. 'We recommend Morgan Stanley,' he says. 'The company has weathered storms before, and there's nothing to indicate it won't weather this one, as well.'

Stein at Korn/Ferry says, 'Any information that indicates there's a fire sale going at Morgan Stanley is vastly overrated.' Management at Morgan is still very credible and committed, he says, and Morgan is still a marquis destination on Wall Street, especially for those interested in investment banking careers specializing in fixed income, structured credit and mergers and acquisitions.

'But this crisis is not resolved and the longer it goes on, the more the firm is compromised and the more the talent drain will continue,' says the recruiter who hires into the bank. 'Obviously, this is serious and somewhat unprecedented on Wall Street, and to say Morgan is hiring is a bit premature. The talent drain, if it continues, is risky.'

That drain should continue near-term at least. Goldstein at The Whitney Group paints a sad scene at the House of Morgan: 'The people over there are very unhappy and spend too much of their day talking about how unhappy they are to their clients versus servicing their clients.'