Morgan Stanley plans to cut several hundred jobs in its wealth-management division as new Chief Executive Ted Pick seeks to rein in costs in an area that is critical to the Wall Street firm’s success but has shown signs of weakening lately.
The cuts, which include a small number of managing directors as well as non-customer-facing employees, are expected to hit less than 1% of the wealth unit’s employees, which number less than 40,000 in total.
Affected employees are expected to be notified as soon as this week, according to people familiar with the matter.
The layoffs represent one of the first major moves under Pick, who took over as CEO from longtime Morgan Stanley chief James Gorman on Jan. 1.
Wealth management has become a major driver of revenue and profit at Morgan Stanley following a string of big acquisitions. Morgan Stanley last year finished integrating E*Trade, which it bought in 2020 for about $13 billion, and is now eliminating overlapping positions and jobs that it doesn’t deem necessary anymore.
The wealth unit, which helps people manage their money and investments, oversees a total of about $5 trillion and accounts for about half of the company’s total revenue these days.
Morgan Stanley also relies on wealth management to smooth out the ebbs and flows of investment banking and trading.
The wealth division has been showing signs of slowing down in recent quarters, however, with revenue coming in flat in the fourth quarter from a year ago. Net new assets totaled $47.5 billion in the period, down 8% from a year ago, after a 45% decline in the third quarter.
Financial advisers, whose primary job it is to bring in new clients and assets, won’t be affected by the layoffs, and the same goes for their support teams. Besides E*Trade, those who will be affected include employees in the unit that is tasked with providing stock-plan services to corporations, as well as those in business management and development roles.
Morgan Stanley’s wealth-management division is facing other challenges. It is under regulatory scrutiny over whether it has sufficient controls in place to prevent rich foreign customers from using it to launder money, The Wall Street Journal reported in November. Federal agencies including the Justice Department and the SEC also have been investigating the bank’s handling of funds tied to an alleged Venezuelan money-laundering scheme.
Morgan Stanley ended 2023 with roughly 80,000 employees in total, down from about 82,400 a year prior. The firm has conducted layoffs several times recently including at the end of 2022, when it cut its global workforce by about 2%, and in the second quarter of last year.