Morgan Stanley Layoffs in Wealth Management Unit

Morgan Stanley is set to lay off several hundred employees in its esteemed wealth management unit as part of a cost-cutting initiative, according to a reliable source familiar with the matter.

Integration of E*Trade

The layoffs are a result of the integration of E*Trade, an online brokerage that Morgan Stanley acquired in 2020. However, they will only impact less than 1% of the wealth unit's workforce, which consists of approximately 40,000 staff members. Affected employees can expect to receive notices this week. It's worth noting that financial advisors and their direct support staff are exempt from the layoffs as they work closely with Morgan Stanley's affluent clientele.

Importance of Wealth Management at Morgan Stanley

The wealth management unit has become a critical component of Morgan Stanley's business operations, contributing a staggering 58% of the company's reported $54 billion revenue last year. This substantial increase in contribution, up from around 48% between 2009 and 2014, highlights the company's strategic shift towards wealth management from investment banking in the aftermath of the financial crisis. Managing money for clients offers a steady revenue stream that has helped boost Morgan Stanley's stock performance over the past decade, although shares experienced a decline last year due to interest-rate challenges and an investment banking slowdown. Additionally, the company's wealth management business fell short of its fourth-quarter profit margin target of 30%, reporting a pretax margin of 24.9%.

CEO Transition and Current Performance

These layoffs mark one of the first significant moves executed by new CEO Ted Pick, who succeeded James Gorman on January 1st. Morgan Stanley, one of the nation's largest wealth managers, employs over 10,000 advisors and operates a robust online brokerage platform through E*Trade. The company currently manages more than $5 trillion in client assets. Although Morgan Stanley concluded 2023 with slightly over 80,000 employees overall, the stock has declined by 17% in the last 12 months and by 10% this year.