Morgan Stanley Smith Barney Plans to Close 120 Offices - Impact on Current Employees Unknown
One hundred twenty Morgan Stanley offices are expected to be closed throughout the United States, according to a recent article by Michael J. Moore in Bloomberg.com, “Morgan Stanley Smith Barney to Close 120 ‘Overlap’ U.S. Offices.” The firm is reportedly seeking to eliminate “overlap” created by the merger of Morgan Stanley and Smith Barney.
“There’s overlap in just about every market in the country between Smith Barney and Morgan Stanley offices,” Charles Johnston, the firm’s President, said. “There’s no grand plan to dramatically shrink the footprint, but there’s an awful lot of no-brainer decisions when you do a deal like this.”
Ironically, Morgan Stanley Smith Barney is looking to expand outside the U.S. because those markets are set to grow faster, Johnston said. “We don’t have a large enough footprint in those markets,” Johnston said.
Although Morgan Stanley Smith Barney says that the number of its representatives is expected to be about the same, other reports indicate that brokers are leaving large firms like Morgan Stanley Smith Barney in large numbers.
Indeed, Charles Schwab Corp. added a record number of independent investment advisors in 2009 as thousands of brokers left Wall Street firms, like Bank of America, Merrill Lynch, and Morgan Stanley Smith Barney, to launch their own investment advisory firms. See Reuters “Schwab says ‘breakaway broker’ trend has legs,” by Joe Rauch, Jan. 25.
Schwab reportedly entered agreements to provide custody, trading and other support services to 172 “wealth adviser teams” last year - a 40 percent increase from 2008 and Schwab's fourth consecutive record growth year in this area. Schwab currently holds $590 billion of assets in custody for advisers at independent firms, according to the article.
Schwab says it sees this trend continuing notwithstanding Wall Street’s contention that the pace has slowed. "There's a tremendous amount of inquiry," Bernie Clark, head of the Schwab Adviser Services unit, told Reuters. "The movement, if anything, is increasing."
Schwab also noted that advisers are leaving firms of all sizes, not just the biggest brokerage houses. "The moves are distributed more now than it's ever been before," Clark said.
Brokers who are thinking of leaving their firms should consult with an attorney with experience in representing registered representatives in employment matters. Brokers often need assistance in becoming registered as investment advisers, setting up investment advisory firms, and drafting contracts, among other things. In addition, there are usually a number of other legal issues that need to be addressed, including compensation issues and questions about the enforceability of restrictive covenants in employment agreements.
Page Perry, LLC is an Atlanta-based law firm with years of collective experience representing individuals in employment disputes with brokerage firms. The firm is also active in setting up registered investment advisors, establishing hedge funds and dealing with regulatory matters. For further information, please contact www.pageperry.com.
