Morgan Stanley is poised to implement a series of layoffs within its esteemed wealth management division as part of an initiative to reduce costs.
This decision is set to affect a small fraction of the division's workforce, specifically less than 1% of its approximately 40,000 employees, stemming primarily from the consolidation efforts following the acquisition of E*Trade, the online brokerage platform Morgan Stanley acquired in 2020.
Notices are expected to be distributed to the impacted employees within the week. It is important to note that this restructuring will not impact financial advisors or their immediate support teams, who play a pivotal role in servicing Morgan Stanley's affluent client base.
This development was initially reported by the Wall Street Journal and underscores the importance of the wealth management sector to Morgan Stanley's overall business strategy. Indeed, the wealth management division has emerged as a cornerstone of the firm, contributing 58% to the firm's total revenue of $54 billion in the last fiscal year, a significant increase from the 48% contribution recorded between 2009 and 2014.
In the aftermath of the financial crisis, Morgan Stanley strategically realigned its business model to prioritize wealth management over investment banking, recognizing the consistent revenue streams generated from managing client assets.
This strategic pivot has significantly buoyed the firm's stock performance over the last decade, despite recent challenges such as adverse interest rate environments and a deceleration in investment banking activities. However, the firm's wealth management business has reported a profit margin below the targeted threshold in the fourth quarter, achieving a pretax margin of 24.9% against a goal of 30%.
The firm's stock has experienced a 17% decline over the past year and a 10% drop in the current year. These layoffs mark one of the initial major actions under the leadership of new CEO Ted Pick, who assumed the role on January 1, succeeding James Gorman.
Morgan Stanley stands as one of the largest wealth managers in the United States, boasting an extensive network of over 10,000 advisors, a robust robo-advisory service, and the significant online brokerage capabilities of E*Trade. The firm manages more than $5 trillion in client assets and concluded the year 2023 with just over 80,000 employees across its entire operations, as revealed in its latest earnings report.
