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Pru to Slash Workforce; Up to 300 Small Producers on Chopping Block

Prudential Securities has begun a firm-wide campaign to ax under-producing brokers, according to several Prudential sources. Perhaps as many as 300 reps may be dismissed over the next few months.

Prudential Securities has begun a firm-wide campaign to ax under-producing brokers, according to several Prudential sources. Perhaps as many as 300 reps may be dismissed over the next few months.

The exact number of underproducing brokers already fired could not be determined, although Registered Rep. has been told by reliable sources that the number so far is around 25 or so. Prudential officials declined to comment.

Pru management is said to accomplish two things at once: to "get rid of dead weight" and to motivate underachieving reps, according to several Prudential sources.

Brokers who produce less than $325,000 or so are facing dismissal, according to Prudential sources, who spoke on the condition that their names not be published. Reps who are in danger of being fired have an account size that averages around $25,000, according to sources; those accounts will be sent to Pru's national client center.

"Management wants to wake up brokers who are on the bubble, so to speak, with slumping production numbers," according to a Pru branch manager.

The 300 or so brokers being let go comprise a small percentage of the 5,900-broker workforce. "Now that we're a public company, our earnings are open to more scrutiny," says a rep. "So the firm has to be more conscious about the bottom line. Shareholders demand it."

Prudential, which went public in December 2001, is expected to announce its revenue and earnings on Tuedsay, May 8. Consensus estimates put Pru's earnings at $0.47 a share versus $0.51 a share a year ago in the quarter ended March.

With the bear market wreaking havoc on brokerage firms P&L statements, most firms have been trying to control costs by cutting personnel. But most of the cuts have been limited to non-producing staffers. Investment banking and back office staff have been generally under the ax. For example, JP Morgan Chase, which already has undergone a drastic downsizing, is expected to cut 500 more staffers in a grand re-organization of its investment banking units; and Merrill has been busily cutting costs by closing branches and trimming back office personnel.

Several reps interviewed by Registered Rep. for this story have no problem with the dismissals.

"I've been in the business for 25 years and some of these brokers have been living fat for far too long," he says. "The firm hires them, gives them a decent base salary and gives them two or three years to get their feet on the ground. Yet in a difficult market like this, and with what the firm is paying out, these baby brokers, as I like to call them, just aren't cutting it. Their work ethic is not good and they're not making it."

The firm, says another rep, has no alternative but to cut them loose. "Most of the accounts they have are small and bothersome anyway," he says.

One rep says there is a story going around the Street that the reason for the dismissals is to boost the average production level for brokers. "But that's false," says the rep. "The story is that some branch managers have been informed that the average [broker's] production level should be $580,000 and that the average today is around $310,000, that the firm feels that's too low, and that they want to get those assets into the hands of more experienced brokers in order to make those assets grow. Well, that's just flat wrong."

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