Morgan Stanley aims to continue aggressively recruiting financial advisors and halt their attrition, according to the bank’s senior executives.
"We’re seeing Morgan Stanley become the destination of choice for financial advisors," Chief Financial Officer Jon Pruzan said Thursday in a call with stock analysts after the bank reported its third quarter earnings.
“The pipeline for recruiting certainly in the near term is strong,” Pruzan said.
James Gorman, the bank’s chairman and CEO, added: "People aren’t leaving."
Morgan Stanley had 15,469 FAs in the third quarter, 70 more than in the prior quarter, but 84 fewer than the same quarter in 2019.
Morgan Stanley energized recruiting efforts in January, when it created a new role — head of national recruiting and client retention — and tapped Ben Firestein, a former Manhattan complex manager, to fill it, says Danny Sarch, president of recruitment firm Leitner Sarch in White Plains, N.Y.
Since then, the wirehouse has offered prospects cash upfront — possibly even as much as 180% of the FAs’ 12-month trailing production numbers, estimates Bill Willis, president and CEO of recruiting firm Willis Consulting in Palos Verdes Estates, Calif.
Morgan Stanley has also sweetened the deal for potential recruits by ending its practice of rushing to court to seek temporary restraining orders aimed at preventing defecting FAs from taking clients with them out the door, Willis says.
“They gave up on it because it was a losing proposition,” he says.
In contrast, Morgan Stanley filed 13 of such requests in federal courts in the first 20 months after its November 2017 withdrawl from the Protocol for Broker Recruiting, court records show. The protocol allows departing brokers to take some client data with them without the threat of a lawsuit.
BrokerCheck records show that in the past two months, Morgan Stanley has recruited at least six veteran FAs from its rivals Merrill Lynch and UBS. Among those who have made the move to Morgan Stanley are:
Despite what Gorman and Pruzan said about halting attrition, some FAs have jumped from Morgan Stanley to other shops, including Marie Moore, a 32-year industry veteran, who took her Dallas-based team to Rockefeller Capital Management.
Meanwhile, on the call, the CEO and CFO reiterated expectations that the bank’s purchase of E*Trade will increase internal client referrals for the wirehouse’s FAs.
Some of E*Trade’s robo clients will “ultimately” seek the help of Morgan Stanley FAs, Pruzan said.
E*Trade’s workplace-focused units, including its stock plan administration services arm, have historically achieved higher rates for converting employee retirement and stock plan participants into wealth-management clients, Pruzan said. E*Trade’s conversion rate tops 20%, compared to Morgan Stanley’s 3%, Gorman added.
But recruiters tell FA-IQ that FAs are skeptical.
The E*Trade stock administration unit may produce “some” client leads for “some” FAs, “but I don’t think it’s a game changer” for Morgan Stanley, Willis says.
“No one trusts that a wirehouse would give a referral. It is to be determined,” says Louis Diamond, executive vice president and senior consultant at Morristown, N.J.-based Diamond Consultants. Diamond, however, counts Morgan Stanley as a client, and he ranks its offers to FA recruiting prospects as appealing, he says.
“It will be interesting to see if the lion’s share of leads go to a handful of teams that specialize in employee stock options, or if the distribution is more broad-based,” says Mark Elzweig, president of New York-based Mark Elzweig Company.
Do you have a news tip you’d like to share with FA-IQ? Email us at firstname.lastname@example.org.