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Next step for Morgan Stanley: Pay cuts for advisers

  • In the final and maybe most difficult step of CEO James Gorman's drive to cut staffing costs across Morgan Stanley (MS), the bank is considering reductions in pay to its wealth managers, reports Reuters.
  • At the moment, writes reported Lauren Tara LaCapra, changes at the margin are being looked at like cutting pay for those brokers generating the smallest amount of revenue, and slashing the amount of money used to lure experienced rainmakers.
  • Cutting pay to brokers is more easily said than done because even mid-level advisers are in high demand and can jump ship, usually taking loyal customers with them.
  • Gorman has previously stated his goal of paying 55% or less of wealth management revenues to brokers vs. 60% today. A move that large would save $884M in costs next year.
Comments (7)
  • Mike Spelman
    , contributor
    Comments (64) | Send Message
     
    The Yankees tried this once, at the end of the George Steinbrenner era. It did not go well
    1 Jul, 08:30 AM Reply Like
  • june1234
    , contributor
    Comments (2626) | Send Message
     
    yankees as they have for the last 20 yrs maintain MLBs highest payroll
    1 Jul, 08:35 AM Reply Like
  • june1234
    , contributor
    Comments (2626) | Send Message
     
    wonder if that MS analyst who several yrs ago predicted Spain would overtake Germany as the EUs top economy is on that list. They need mandatory drug testing over there.
    1 Jul, 08:34 AM Reply Like
  • Bouchart
    , contributor
    Comments (776) | Send Message
     
    No, it's probably the guy who said Tesla would bring about utopia in 2026.
    1 Jul, 10:57 AM Reply Like
  • minecanary
    , contributor
    Comments (462) | Send Message
     
    Of course, when a head banker saves $800 mill in costs, he just moves another 100 mill into his pile.
    1 Jul, 11:03 AM Reply Like
  • Calimornya
    , contributor
    Comments (7) | Send Message
     
    No wonder so many brokers left MS years ago. “If you’re really unhappy, just leave,” Gorman said, showing his leadership skills in retaining talent and rewarding employees for their work. Gorman feels entitled to his pay though? Why wouldn't he fire himself using his own criteria seeing as how the stock is less than half of what it was when he started MS in 2006, and it is still less than two thirds of what it was when he took over operations in 2007? He lacks the discipline to admit failure and fall on his sword for the good of the company, though. MS Total revenues in 2006 were stated to be 29.8 billion, and 2013 revenues were about 32.4 billion. So in 8 years of his expertise he has grown the business about 1% per year. Wow. He wouldn't stand for one of his brokers to do that kind of poor growth but there are rules for employees and free passes for failure at the management level. Gorman made $8.56 million for 2011. Gorman's 2013 compensation jumped 73% to $18 million. So why did his compensation more than double in two years when the stock and the company performance didn't? I know, let's blame the brokers he said he was there to cherish and cut their pay while funneling the product of his failures to Gorman at the top. Right.
    1 Jul, 11:33 AM Reply Like
  • Sensible Investor
    , contributor
    Comments (87) | Send Message
     
    Gorman's sole claim to fame is buying a ready made brokerage from Citi that his firm amply demonstrated it could not do with Dean Witter, which lost over 3,000 brokers from an initial count of 9,000. I am still wondering why he only fixates on costs as the sole focus of his firm, and how the US allows the Japanese to hold 22% of MS. The only reason that MS survived the financial crisis was that only the Japanese invested in the firm. Now that the crisis is over, I'd challenge Gorman on this 4th of July to show he is committed domestically to the firm, and buy back the 22% stake from MUFG.

     

    I am also curious how MS competes against Bank of America and JP Morgan in Banking, while Wells Fargo continues to outpace them as well. In short, nothing James Gorman is particularly innovative, or competitive, and his rivals dwarf his firm in both scale and market cap. The share price of MS is another issue, still around 32, while not approaching the 2000 peak of over 90. Thus, one asks, what exactly is Gorman's leadership value? Is he innovating, creating US jobs, establishing an answer to his rivals' brick and mortar US banks, which he stubbornly refuses to build? What exactly differentiates him from Jamie Dimon? Nothing. He's just filling his post, nothing more.

     

    The hard question that shareholders need to ask is whether James Gorman should step aside given his clear lack of leadership and inability to add value at any stage of the business. Shareholders certainly aren't benefitting from his myopic approach to business. Cut costs! That's his mantra, and certainly a narrow view of his business. No, James, if you want value, and loyalty, you spend money to make money. Cost cutting is unimaginative, and perhaps MS needs a different leader who appreciates his domestic obligations. Perhaps, too, MS needs a bigger US partner to offer clients a larger scale.
    4 Jul, 10:05 AM Reply Like
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