Morgan Stanley: Best Of The Lot?

While Merrill Lynch and Wachovia Securities' respective mergers might recall Frankenstein, Morgan Stanley's transformation brings to mind a Park Avenue afternoon facelift. This year, although Morgan Stanley's overall score (7.1) was down from last year (7.6), the firm seems to be continuing its turnaround; it moved up from fifth place last year (tied with Smith Barney) to third after Edwards Jones

While Merrill Lynch and Wachovia Securities' respective mergers might recall Frankenstein, Morgan Stanley's transformation brings to mind a Park Avenue afternoon facelift.

This year, although Morgan Stanley's overall score (7.1) was down from last year (7.6), the firm seems to be continuing its turnaround; it moved up from fifth place last year (tied with Smith Barney) to third after Edwards Jones (of course) and Merrill Lynch.

“After rough years from 2002 to 2005, it has become the firm of choice,” says one rep who answered our survey. “It is the only firm moving in the right direction at this time.”

Morgan Stanley is a recruiting success: At the end of October, total recruits were up about 30 percent over last year. In addition, the average trailing 12-month revenue these recruits brought with them was up about 60 percent; average AUM per advisor jumped to $70 billion versus $50 billion last year.

Andy Saperstein, head of national sales at Morgan, says the recruiting success and improved morale is a result of better relationships with FAs.

Not that Morgan Stanley is perfect. In fact, the majority (46.2 percent) of Morgan reps surveyed said asset-backed securities and the ARS debacles have made them more skeptical of all financial products.

Still, Morgan is holding onto its niche in the brokerage space. One advisor says he thanks management — namely co-president of the firm James Gorman and CEO John Mack — for saving the firm from a fate worse than Merrill Lynch. “We're lucky to have Mack and Gorman operating, otherwise, who knows, we could have been Lehman brothers.”

Morgan Stanley at a Glance

Company hero: John Mack

Share price performance: 10/20/08 price, 52-week range:
$9.44, $6.71 - $55.39

Q3 net client assets, growth (decline) vs. 07:
$707 bn, (4%)

Q3 advisors, growth (decline) vs. 07:
8,500, 2%

Performance of retail unit (Q1-Q3 2008)
Revenues: $5.6 bn
Pre-tax income: $1.21 bn
Profit margins: 22%

Performance of private bank (Q1-Q3 2008):
Bankers: N/A
Revenue: N/A
Pre-tax income: N/A

Write-downs: $15.7 bn

Bank Deposits: $36.0 bn

Bank branches: N/A

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