New Morgan Stanley CEO John Mack hasn't wasted any time living up to his nickname.
“Mack the Knife” made his first big move on Morgan’s rank-and-file this week, instructing branch managers to dismiss approximately 1,000 brokers Thursday morning. The cuts flowed from strict performance guidelines, top brokers and well-connected recruiters say. (Registered Rep. was first to report the timing of the pending cuts Wednesday night.) By Thursday afternoon, the departing brokers’ clients already had been reassigned to other Morgan Stanley brokers, sources say.
Under the performance guidelines, Morgan fired brokers with eight years or more of experience and annual production below $225,000. It also cut brokers with five-to-eight years of experience and under $150,000 in production, as well as those with one-to-four years of experience and under $100,000 in production. Brokers over age 60 with at least eight years of experience were dealt with on a case-by-case basis, sources told Registered Rep.
A Morgan Stanley spokeswoman declined to comment. The firm announced its plans to cut the bottom 10 percent of its workforce two weeks ago in a memo. “According to my sources, Morgan enacted these guidelines and they took effect in most major markets this morning,” recruiter Chris McBratney, a partner with WorldBridge Partners, said Thursday afternoon.
“We have attempted to contact some of the brokers that were on the edge of being cut, only to find that the firm has severed ties,” he said Thursday. Certain markets were hit harder than others, said McBratney, including one office in San Antonio, where 10 out of 40 brokers were pink-slipped. He added that there were some surprises for brokers who “were right on the cusp” of the performance categories, “but the firm took the direct approach, with little to no exception.”
Terry Rutledge, a recruiter with Rick Peterson & Associates in Houston, echoed this thought.
“One broker that called this morning, everybody in his office was just flabbergasted that he got the ax, because he was really good,” said Rutledge. In the particular broker’s case, he was held to the criteria applied to brokers with four years of service because, although he had only been practicing for two years, he had been licensed for four years. “People who worked with him think he was probably within $1,000 of the $150,000 cutoff,” he says. Morgan had to stick to such a strict formula, said Rutledge, because otherwise the firm could face discrimination lawsuits later on from those who were let go.
For brokers booted from Morgan, the options are somewhat limited, he said. Brokers with 20 years, doing $200,000, could go to TD Waterhouse or an independent. A rep with a couple of years experience and $80,000 to $90,000 might be able to get into another firm’s training program. But those with over four years of service and low production levels might have to find a senior rep who'll take them on as an assistant, he says.