In another move designed to cut costs and increase average broker production, Morgan Stanley has trimmed its broker training program down to between 700 and 1,000 trainees a year — from about 1,750 a year. Some 500 trainees were cut loose in May, nine months after 1,000 poor-producing advisors were forced to depart.
The firm brought in a total of roughly 7,000 trainees in the past four years, and wealth-management leader James Gorman thought many were "not achieving success," according to a company spokesman.
"People weren't cutting the mustard, so they cut the bait and dropped 500 in order to better develop their culture of productivity and better focus on productivity," explains Howard Diamond, managing director of recruiter Diamond Consultants in Chester, N.J.
"They're still hiring trainees," Diamond adds. "But they are being more selective – targeting those not just with a college degree but with a Rolodex, who are looking for a second career."
"It's a work in progress," explains recruiter Carri Degenhardt-Burke, president of Degenhardt Consulting in Jersey City, N.J., "and reflects the changing philosophy of the past few years." Her opinion? The cuts make sense.
And other wirehouses seem to agree with Morgan Stanley's approach. "This is a big-time secular trend across the wirehouses," says Chip Roame of Tiburon Advisors in Tiburon, Calif. "They are recruiting fewer trainees, and are being more strategic in terms of retention."
In recruitment, Morgan Stanley offers include the best that's out there, observers note. The firm's policy is: "There are no cookie-cutter packages; every deal is structured and crafted differently," Diamond explains. "That's what the company is telling us and showing us by their actions."
Advisors expressing some interest in joining Morgan Stanley are coming from rival firms, such as Smith Barney, as well as from Legg Mason, Bank of America and other companies, recruiters say.
"It's getting easier to hire for Morgan Stanley," explains Diamond. "They are tightening their high-net-worth focus and trimming the fat."
The training cuts should have no impact on recruiting, says Degenhardt-Burke. Gorman has trimmed management down to four layers from eight. "The streamlining is empowering managers at the lower levels and should ultimately do the same for financial advisors," she explains.
