Yesterday, new Morgan Stanley retail chief James Gorman unleashed a fresh round of cuts – with more expected shortly – as part of his efforts to right the faltering brokerage operation.
In a memo to brokers, Gorman said the firm would cut 15 percent or about 20 to 25 executives who oversee Morgan’s retail brokerage in and around New York. The firm will also consolidate 61 “areas”, which reported to regional managers, into 23 “districts.”
New district managers will be named in the coming days, Gorman said. Recruiters speculated that some of those district managers would come from Merrill Lynch, Gorman’s old firm. Gorman has already poached three of his former colleagues for other positions since joining Morgan Stanley, something that prompted Merrill to request and obtain a restraining order against him last week. Merrill, Morgan and Gorman met in court over the issue today.
“I think brokers and managers at Morgan Stanley are on pins and needles -- anxious to see which managers he puts in place,” said Danny Sarch, a recruiter with Leitner Sarch Consultants in White Plains, NY.
Two weeks ago, Gorman cut out two layers of management between himself and regional management, putting Rick Sanchez and Michael Burke out of a job. He also reduced the number of regional offices to four from eight, now called "Divisions". Two of those spots were filled by former Merrill executives, and another two by Morgan regional managers. One of the remaining six regional managers has told Morgan that he's moving to UBS, but the the jobs of the other five are still up in the air.
Nor is this round of cuts likely to be the last. “There’s going to be significant layoffs at Morgan Stanley,” said Columbia law professor John Coffee. “He’s not finished yet, I’m sure,” agrees recruiter Richard Schwarzkopf, of Schwarzkopf Recruiting Services in New York, NY.
Brokers are unsettled by the changes, Schwarzkopf added, even though many of them expect Gorman will do good things for the firm. “Brokers hate it when there’s an upheaval, when people change, and new people come in,” says Schwarzkopf. "Brokers don’t want people to make waves. Then again, Gorman is good at making firms profitable, so they’ll look beyond that and say, he’ll be good for the stock.”
In addition to the cuts, an Associate Division Director was appointed under each Division Director. All of the Associate Division Directors have long tenures at Morgan Stanley and have previously held management positions.
Jim Mahon, who has been with Morgan for 17 years and was formerly the Western Regional Director, will support Margaret Black as the new Associate Division Director of the Western Division. Jon Abrahamovich, who has been with the firm for over 20 years, will support Jerry Miller as the new Associate Division Director in the firm’s Central Division. Most recently, Abrahamovich served as the Regional Sales and Marketing Director of the Midwest Region. Dan Cedro, with 14 years at Morgan and formerly regional director of the Southern Region, will work under Bill McMahon as the new Associate Division Director of the Southern Division. And Todd Taylor, formerly the Regional Sales and Marketing Director for the Northeast Region, will support Rick Skae as the new Associate Division Director of the Northeast Division. Taylor has worked at Morgan Stanley for more than 18 years.
“While it is difficult to see colleagues go, please understand that these changes are designed to better position the organization going forward,” Gorman wrote in the memo. “We will continue to review our talent and resources and expect other changes will follow in the near future.”