America’s big brokerage firms just don’t get it. Rather than focusing on their clients’ best interests, which would enhance the firms’ long-term interests, they are focused on getting rid of so-called “less productive” financial advisers to save money, and flogging the rest to sell more high-fee products to generate more revenues for the firm. Morgan Stanley’s chief financial officer Ruth Porat confirmed this on a conference call with analysts this week by reportedly saying: “Greg Fleming [head of retail brokerage]’is focused on reducing the number of less productive FAs and that brings some cost savings.” Again, big brokerage firms keep track of what is produced for the firm, not what is produced for clients. CEO James Gorman seconded: “We are not focused myopically on our size but on the returns we generate for our shareholders.”
Thus, Morgan Stanley Smith Barney has 752 fewer “less producing” financial advisers than it had at the beginning of the year, and 347 departed in the last quarter. It is no secret that the big producers have one-track minds about generating wealth for themselves and the firm, not providing sound financial advice to clients. The ones getting fired may or may not provide good advice, but at least they are motivated by more than just generating fees and commissions for themselves and the firm.
Wall Street has shed 4,100 jobs since April. Bonuses and other compensation, while still obscene by Main Street middle class standards, are declining as well.
At UBS, a $2.3 billion proprietary trading loss resulted in a new CEO who is pushing job cuts in addition to the 3,500 announced earlier this year.
Wall Street needs to do a U-turn and reward true fiduciaries who work for their clients’ best interest, not “big producers.”
Page Perry is an Atlanta-based law firm with over 150 years collective experience protecting investor rights and fighting Wall Street greed.