As Morgan Stanley drops “Smith Barney,” some wonder about the brand

December 4, 2012

At the Goldman Sachs investor conference on Tuesday, Morgan Stanley wealth management executive Greg Fleming ran through his 31 slides like a financially savvy drill sergeant, with a full discussion of margins, lending, technology, “value propositions” and “illustrative solutions.”

But in the Q&A session, he was asked an unusually thoughtful question by an audience member: What about the brand, and the culture, of Morgan Stanley Wealth Management?

As Morgan Stanley has taken control and increased ownership of the Smith Barney retail brokerage from Citigroup, legacy Smith Barney brokers have often complained about what’s happening to the culture. Morgan Stanley is all about numbers and metrics, they say, expecting brokers and managers to constantly do more with less.

Morgan Stanley has fired hundreds of underperforming brokers who, under previous standards, were performing just fine. It also got rid of duplicative managers and lots of back office and administrative staff, as Fleming sought to chop $300 million off its annual expense bill. Adviser headcount is down 7 percent over the past three years, while other staff has been cut by 15 percent.

A new technology system that rolled out this year also has a feature to track broker activity, including the data and research they use, so that Morgan Stanley can monitor productivity and cut subscriptions for services that aren’t in high demand.

The effect of all this number crunching, brokers say, is less camaraderie, shorter lunch breaks and shorter tempers. (As though this is a new thing on Wall Street.)

The proverbial salt on brokers’ wound came this year, when Morgan Stanley stripped the business of the Smith Barney moniker  changing its name from Morgan Stanley Smith Barney to Morgan Stanley Wealth Management.

It doesn’t take much to get a broker to complain — they’re a notoriously high-maintenance bunch on Wall Street — but, in his own way, Fleming acknowledged their grievances.

“Smith Barney was more entrepreneurial,” he said, and “did a lot more on a less centralized basis.”

He said that one of his goals going forward is to create a more cohesive culture under the Morgan Stanley brand that fosters loyalty among its army of brokers.

However, Fleming didn’t rule out more staff cuts ahead, saying Morgan Stanley isn’t trying to be the biggest brokerage in terms of headcount. Instead, it wants to be the most profitable.

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