Morgan Stanley plans to cut several hundred jobs in its wealth management unit, The Wall Street Journal first reported Wednesday.
Affected employees — who number less than 1% of the bank’s headcount in the unit — could be notified as early as this week, people familiar with the matter told the publication.
The bank is eliminating redundant roles after wrapping up its integration of E*Trade last year, the Journal reported. Apart from that, the cuts will encompass mostly non-customer-facing employees and a small number of managing directors, according to the publication.
Financial advisers and their support teams won’t be affected by the layoffs, the Journal reported.
The upcoming round of layoffs would be at least Morgan Stanley’s third since late 2022 but a first for CEO Ted Pick, who took over the bank’s top role Jan. 1.
Morgan Stanley cut roughly 1,600 employees, or about 2% of the bank’s headcount in December 2022, then made deeper cuts around June of last year under former CEO (now executive chair) James Gorman.
Among the surprises, perhaps, in Morgan Stanley’s cuts, is where they’re aimed. Morgan Stanley rebuilt itself during Gorman’s tenure by expanding its wealth management footprint. The division, as of late last year, oversaw $4.8 trillion in assets — and Pick said last month he is gunning for that number to more than double.
“Ten trillion in wealth and asset management dollars, that’s going to be coming,” Pick told CNBC in Davos, Switzerland, in January. “We’re going to get there and hit 20% returns. That's it: 10 and 20. It will take some time, but I'm super bullish.”
Pick, an investment banker by background, was chosen in October to lead Morgan Stanley over the executive now in charge of wealth management, Andy Saperstein. But Morgan Stanley took pains to keep Saperstein on after Pick’s appointment — handing both executives $20 million in equity-based compensation.
At the time of Pick’s ascent, at least one analyst warned that the new CEO must make clear early on that wealth management is “still the driver of the long-term growth of the business.”
“The downside [of Pick becoming CEO] is a perceived de-emphasis of wealth management within the company,” Christian Bolu, a banking analyst at Autonomous Research, told the Financial Times in October.
Pick, in his first quarterly earnings call last month, indeed said the wealth segment is the engine of Morgan Stanley, according to Bloomberg. However, the bank warned it would take more time to reach its profit-margin goals in wealth, adding that below-target results would persist in the short term.
Wealth management accounted for 48% of Morgan Stanley’s total revenue in 2023, Bloomberg reported. Investment banking, by comparison, represents 42.2%. Net new assets in wealth totaled $47.5 billion in last year’s fourth quarter. That’s down 8% from the same period a year ago. Third-quarter figures slid 45%. That means the wealth unit notched two straight quarters with less than $50 billion in net new assets — off pace to reach its target of $300 billion a year.
It should be noted, too, that the layoff targets are mostly non-customer-facing employees, signaling perhaps a trend in downsizing. Deutsche Bank, when it announced that it aimed to cut 3,500 roles by next year, said its targets were mostly back-office workers.
Morgan Stanley’s wealth management unit, meanwhile, has seen its share of scrutiny from federal agencies. It’s under investigation by the Federal Reserve for how it vets potential customers who live abroad before taking them on, The Wall Street Journal reported in November.
The bank has also been under separate investigation by the Justice Department, the Securities and Exchange Commission and other agencies since at least 2021 over how it handled funds tied to an alleged Venezuelan money-laundering scheme.
Morgan Stanley declined to comment to Bloomberg on Wednesday regarding reports of staff cuts.
