After losing out to Merrill Lynch over a deal with investment manager BlackRock earlier this year, Morgan Stanley has come back with a win or two of its own — picking up at least three Merrill Lynch executives and winning a legal squabble involving its top rival.
"Merrill Lynch is running scared with their management being taken — because when good managers leave, they take good producers with them," says Howard Diamond, managing director of Diamond Consulting in Chester, N.J. "It seems that James Gorman is coming in and shaking things up."
But shakeups aren't easy, and some experts see a resulting slowdown in Morgan Stanley's recruiting efforts. "Morgan Stanley's recruiting is almost non-existent," says Mark Bradley, managing director of Esquire Staffing in Chicago. "There's enough turmoil at the branch level that they're not motivated" to recruit.
Gorman, Morgan Stanley's retail chief and a former Merrill exec, successfully fought off a temporary restraining order, or TRO, Merrill had slapped on him in late March over the alleged solicitation of Merrill managers and other staff. New York State Supreme Court Justice Emily Jane Goodman found "a lack of evidence of solicitation" on Gorman's part, it was reported.
"The TRO was meant to stop the [Merrill Lynch] exodus," says Bradley, "and to send a message that it wouldn't take this lying down."
Gorman took charge of Morgan Stanley's retail unit on February 17, roughly six months after leaving Merrill Lynch, and promptly renamed it the Morgan Stanley Global Wealth Management Group.
More recently, he has streamlined management — reducing the number of regional directors to four from eight.
As part of this effort, he hired Richard Skae, formerly a regional director of Merrill's New York City operations and an ex-UBS employee, and Jerry Miller, formerly chief operating officer for a Merrill Lynch asset management business and a private-client executive.
Miller is now in charge of Morgan Stanley's retail brokers in the Midwest, while Skae heads up the Northeast. Margaret Black is to lead the West; she formerly directed Morgan Stanley's Southern California operations. Bill McMahon is in charge of the Southeast; earlier, he was head of the firm's New York operations
Gorman also tapped ex-Merrill Lyncher Andrew Saperstein as chief operating officer of national sales for the Morgan Stanley retail group.
And in early April, Jeffrey Gelfand — a former Wachovia Securities chief financial officer and Merrill Lynch exec — began his move to Morgan Stanley to serve as CFO of the wealth management group.
"He's doing what made him a success at Merrill Lynch, which is why [Morgan Stanley Chairman and CEO] John Mack hired him," notes Bradley. "He's got a template to work with," though some of his restructuring efforts seem to be getting bogged down because of internal resistance, the recruiter adds.
In terms of the legal tiff with Merrill, Morgan Stanley has said its executives cannot be barred from receiving calls from Merrill employees seeking employment with the rival firm.
"James Gorman is too savvy to have gone out and to intentionally have violated a covenant or restriction" in his contract with Merrill, Diamond explains. "If he did, he knows he would see it all fall by the wayside."
Gorman is now functioning as the firm's head of national sales with direct oversight of some 9,000 financial advisors, says Morgan Stanley. Before the appointment of the four regional execs, there were eight regions with two layers of management between Gorman and the regional heads. Now, the regional directors report directly to him.
