Retail brokers who want to join a major wire house or leap from one big firm to another may find fewer financial goodies stacked on the welcome than was common a year ago.
The sector's two biggest players - Bank of America Merrill Lynch and Morgan Stanley Smith Barney - say they're done with recruiting wars that lit up the landscape in the months before and after the mergers that gave rise to both firms. Defections of brokers slowed to a trickle in the fourth quarter, Investment News reports, citing figures detailed in Morgan Stanley's and Bank of America's latest earnings reports and conference calls.
At Morgan Stanley Smith Barney, turnover of high-producing brokers shrank to less than 1 percent last quarter, a historic low. The joint venture between Morgan Stanley and Citigroup, previous owner of the Smith Barney franchise, had 18,135 representatives on Dec. 31, compared with 18,160 on Sept. 30. The months before the combination took effect last June saw a steady outflow of brokers from both partner firms to other wire houses, regional wealth management firms and to launch independent practices.
Recent Stability Will Persist, Says Gorman
"The lower turnover is for real," Chief Executive James Gorman declared during Morgan Stanley's conference call Wednesday. "For the next couple of years it should stay low and relatively stable."
Merrill Lynch saw even more of its brokers flee before and after its purchase by Bank of America at the end of 2008. Merrill began last year with roughly 18,000 and lost 2,000 in the first quarter and more than 1,000 in the second quarter. Thereafter, however, the figure held steady at roughly 15,000. In fact, Bank of America wealth management chief Sallie Krawcheck disclosed last week that attrition hit a record low in the fourth quarter.
The months surrounding the Merrill - BofA merger and leading up to the Morgan Stanley Smith Barney venture gave rise to intense and sometimes colorful recruiting wars.
Tech and Other Support Staff At Risk
Battling for the affiliation of thousands of the nation's highest-producing financial advisers, the merging firms and rivals large and small offered incentives of as much as two years' revenue to either jump ship or stay put. The freefall in brokerage firms' share prices during 2008 decimated the deferred compensation brokers had saved up over the years, giving many professionals a further reason to consider a move.
Although the mergers' career impact on brokers appears complete, the consequences for support staff still lie ahead. And they won't be pretty. Gorman noted Morgan Stanley Smith Barney is "in the middle of a complex integration program" that will continue through the next two years and will entail $450 million expenses for "the rationalization of real estate and information technology." While not mentioned specifically, such wording suggests job cuts and severance costs.