Morgan Stanley Smith Barney is executing one of the last steps in the larger reshaping of its business, slicing the number of complexes in its financial advisor organization from 118 to 86, and cutting its non-producing manager ranks almost in half – from about 150 to 85 executives.
The moves, announced today, aim to deliver what should be the permanent branch structure for the business after several years of efforts to integrate the former Smith Barney and Morgan Stanley brokerages into a single body, says an executive at the brokerage who requested anonymity. The branch network in particular has absorbed several waves of consolidation since the wirehouse’s 2009 forming, most recently slimming down last month from 16 to 12 regions.
[pullquote]What we’re doing is flattening the management structure.[/pullquote] “These will be larger complexes, with a range of revenue from $150 million to $250 million,” the executive says. “What we’re doing is flattening the management structure.”
The latest revamp is part of the “natural progression” of a large merger, the executive adds.
“When you start out integrating two organizations of this size, a lot of the decisions have to be centralized at first,” the executive says. “You have to bang together policies, ways of doing things, pull together an infrastructure – centralizing more than you would like. Now that we’re integrated from a technology standpoint, we take that last step to have a management structure that is flatter, that decentralizes decision-making.”
While acknowledging that the wirehouse’s move to a single technology system has been bumpy – “Some people love it, some people hate it,” the executive says – that transition had to come first.
[pullquote]This will be the structure for the foreseeable future.[/pullquote] “This [reorganization] is the last piece of the integration,” the executive says. “This will be the structure for the foreseeable future.”
The latest move will also increase the number of producing branch managers – who both supervise their advisor colleagues as well as run their own client books – from today’s count of 240 to around 295. The number of “resident” managers, who usually oversee smaller branches, will also rise, from 150 to around 195.
[pullquote]We will look to find alternative opportunities for many people.[/pullquote] The overall impact of the reorganization on individual managers is not yet clear, with many of the displaced higher-level executives eligible to move to the openings in the lower managerial ranks or to advisor roles, the executive says. “We will look to find alternative opportunities for many people,” the executive adds.
The reshaping results in a far leaner branch framework than what the joint venture had when it fused the two legacy wirehouses in 2009. At that time, there were about 1,000 branches, which reported ultimately into 20 regions and four national divisions. The brokerage later moved to three divisions and 16 regions, and most recently sliced the regions back to a dozen.
[pullquote]We’ve sought our strongest managers, demonstrated by performance.[/pullquote] The individual manager cuts will not follow a proportional breakdown by Smith Barney or Morgan Stanley lines. “We’re not looking at that,” the executive says. “There will be people from both legacy houses. We’ve stopped counting that way. We’ve sought our strongest managers, demonstrated by performance.”
Today’s move won’t affect the total number of branches across the wirehouse, the executive says. The branch count has been steadily falling since the initial merger because of opportunities to consolidate offices of the two old brokerages that were close to each other. Excess space and lease endings drive most of those decisions, which have trimmed about 250 branches since the merger, all told.
The wirehouse will consolidate about 40 branches overall this year, the executive says.
By Tom Stabile August 16, 2012