Morgan Stanley will lay off 200 to 300 trainees and lower-producing financial advisers in its brokerage joint venture, according to a person familiar with the situation.
The move is likely to result in Morgan Stanley Smith Barney reporting a headcount of about 17,800 advisers at the end of the first quarter, this person said. However, the unit -- which is essentially Morgan Stanley's entire wealth-management business -- is sticking to its goal of maintaining an advisory force in the 17,500-to-18,500 range for the "foreseeable future," according to this person. The unit is Wall Street's largest brokerage by number of advisers.
Nearly a year ago, Morgan Stanley told Dow Jones Newswires the firm could bring in about 2,000 trainees in 2010.
The planned personnel reduction reflects Morgan Stanley's efforts to address the lower end of its advisory force after it stabilized broker attrition over the past year. It also comes as Morgan Stanley is considering dropping the 73-year-old Smith Barney name from its brokerage force, according to people familiar with the situation. In recent weeks, Morgan Stanley, which controls the venture, asked its clients to choose among six potential names for the operation, none of which included Smith Barney.
The firm is in the midst of integrating its two legacy brokerage forces and has a goal of reaching a 20% pretax profit margin for the business. Morgan Stanley Smith Barney reported a 12% margin at the end of the fourth quarter--its highest since the joint venture closed on June 1, 2009.
Cutting lower producers could boost Morgan Stanley Smith Barney's average adviser productivity, or the average revenue per global representative, which was $742,000 as of Dec. 31, up from $692,000 as of the end of 2009.
Trainees likely to be laid off include brokers who have worked at the firm for six to 36 months who had $25,000 or less in annual production. Lower producers who could be let go include five-year industry veterans who have been with Morgan Stanley for more than a year and have an annual production under $75,000.
However, the policy has exceptions.
"If someone is showing growth potential, there is discretion involved," the person said.
Major brokerages, known as wirehouses, often use training programs to develop talent, some of whom could one day become top producers. However, underperforming trainees are typically among the first to go when firms face difficult market environments or consider paring their headcounts for other reasons as such brokers have smaller books of business than experienced colleagues.
Morgan Stanley declined to comment.
Brett Philbin is a reporter for Dow Jones. Write to him here.
This story originally appeared on WSJ.com.