Merrill Lynch and Morgan Stanley Smith Barney are in a battle for the crown of retail brokerage.
Both firms say they plan to add net FAs in 2010, adding to stated plans to sign up 2,000 trainees each this year. Merrill added 137 FAs in the second quarter as rival MSSB shed 50. But MSSB says it expects to expand its FA force by more than 400 this year. Meanwhile, Merrill has said it will add FAs, but declined to specify how many.
Mother Merrill used to be the undisputed leader of the retail brokerage business by most measures. Prior to the joint venture between Morgan Stanley and Smith Barney in January 2009, Morgan had about 8,000 brokers while Citigroup's Smith Barney had some 11,000, according to Aite Group. That compared with Merrill’s thundering herd, which numbered 15,822 financial advisors. Meanwhile, Merrill had a 31 percent market share of client assets in the wirehouse space in the first quarter of 2009, versus 21 percent at Smith Barney and 12 at Morgan Stanley.
Following the joint venture, MSSB suddenly had a decisive lead in headcount and assets. At the end of the second quarter, MSSB employed 18,087 financial advisors, surpassing the thundering herd's network of 15,142. Meanwhile, Morgan Stanley reported total client assets of $1.5 trillion, versus $1.4 trillion at Merrill.
Still, Merrill is ahead in average revenue and assets per advisor. The average Merrill FA generates $853,000 in annualized revenue, versus $679,000 at MSSB. Meanwhile, average AUM per FA at Morgan is $92.5 million, compared with $83 million at MSSB. (There are some questions about differences in the ways these numbers are calculated, however.)
James Wiggins, a spokesperson for MSSB, dismissed the number of FAs the firm lost in the second quarter as "inconsequential." He noted that the firm was on target this year to recruit 2,000 trainees on an annualized basis. And he reiterated forecasts made earlier this year by the firm, touting plans to grow its FA network as market conditions warrant.
But Morgan Stanley could shed more FAs in the coming months, paving the way for a resurgent Merrill. "We expect to be in a range of 18,000 FAs, and it could go 500 either way, that is 17,500 or 18,500," Wiggins told Registered Rep. "There are a lot of factors that go into that."
Merrill Lynch, meanwhile, said it is on track to recruit 2,000 rookies this year, and said it planned to expand, and not subtract, from its network of experienced FAs. "We are growing [the] number, not looking to grow," Lyle LaMothe, head of U.S. Wealth Management at Merrill Lynch told Registered Rep. in a recent interview. He said the goal was to have more FAs on board by year-end. These new FAs could include competitive hires from outside Merrill. "I am very comfortable saying we are always interested in quality additions to our team and our growth rates will be reflective of good business practices," he said.
As for trainees, "these are individuals generally in their second career, but new to the industry, and we will be training probably between 1,500 to 2,000, between all of the platforms," LaMothe said.
Registered Rep. reported in January that Merrill was planning to ramp up its FA training program this year, recruiting the 2,000 rookies, citing a well-connected industry official. One Merrill exec was quoted in the same story saying the brokerage would recruit "multiples of hundreds." See Rookie Training Makes A Comeback.
Selena Morris, a spokeswoman for Merrill Lynch, said Merrill was focused not just on quantity but on quality of advisors, meaning productivity. "We are interested in hiring and retaining high quality advisors that are able to work collaboratively and have the desire to grow," she said.
