Morgan Stanley May Have To Shut Down Brokerage Offices, Say Sources

Reuters is reporting that sources aware of internal talks taking place at Morgan Stanley (MS) are saying that the financial firm is thinking about shutting down brokerage offices as part of its efforts to increase profit margins in its retail brokerage arm. It also is reportedly considering laying off support employees and making branch managers work as revenues to bring in more money.

Already, Morgan Stanley has consolidated regional manager ranks down from 19, and last week, it narrowed its regions from 16 to 12. More measures to reduce expenses are likely.

Also, last month, the financial firm announced more layoffs when it said that its payroll would likely shrink by another 1,000 employees in 2012 so that it could employ staff levels that were 7% lower than what they were in December 2011. The news came after its second–quarter earnings showed a step decline, while revenue in its asset management, wealth management, and investment banking business saw a large drop, with overall revenue declining 24% to $6.95 billion
The financial firm appears determined to cut spending in its brokerage division now that its close to 17,000 brokers were moved to a common technology platform. Offices from the Morgan Stanley and Smith Barney networks that are considered redundant will likely be the ones shut down, which could affect up to 100 offices. (As of the end of June 2012, Morgan Stanley Smith Barney had 740 offices. Consider that in the middle of 2009, it had over 950 branches in the US alone.) Its bond trading business performed the worst, dropping in revenue by 60% to $770 million-a significantly larger descent than other big banks on Wall Street.

The financial firm is trying, by December 2014, to reduce its risk weighted assets by 30% from the $346.79 billion levels where they were last September. As of June 30, Morgan Stanley had $319.19 billion in risk-weighted assets. It also is contending with its bond trading business declining because there had been the threat of a severe debt rating downgrade, as well as criticism over the way it handled the Facebook (FB) IPO. Fortunately for the financial firm, Moody’s Investors Service only downgraded the bank to “Baa1,” which is three steps over junk.

Morgan Stanley is not the only big bank to have to cut costs after quarterly results were reported. Goldman Sachs Group. Inc. (GS) (now with a $500 million cost-saving target), Deutsche Bank AG (DBK), and Bank of America Corp. (BAC) also made staff cuts in their underwriting and trading businesses. 2011 was the first time that banks didn’t give some employees bonuses.

With so much uncertainty, now, more than ever financial representatives must make sure that they invest their clients’ money wisely and refrain from any type of misconduct or poor decisions that could cause huge losses. At Shepherd Smith Edwards and Kantas, LTD, LLP, we are here to fight for our clients’ recovery from losses stemming from securities fraud.

Morgan Stanley Considers Shutting Offices, Cutting Staff: Sources, CNBC/Reuters, August 8, 2012

Morgan Stanley plans further staff cuts on weak outlook, Reuters, July 19, 2012

Deutsche Bank Said To Consider Staff Cuts At Investment Bank, Bloomberg, July 19, 2012

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Morgan Stanley Smith Barney Ordered by FINRA Arbitration Panel to Pay $5M Over Allegedly False Promises Made To Brokers Recruited from UBS AG, Stockbroker Fraud Blog, June 22, 2012

Ex-Morgan Stanley Smith Barney Broker Settles with FINRA for Allegedly Failing to Notify Firm of Previous Arrest, Stockbroker Fraud Blog, June 16, 2012
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