Morgan Stanley will cut about 1,000 financial advisers, or 10 percent, of its struggling retail brokerage unit, the U.S. investment bank said in an internal memo on Thursday.
The memo from co-President Zoe Cruz, obtained by Reuters, also said the Wall Street firm will cut the number of new broker recruits to 1,000 in 2006 from 2,400 this year but would continue to hire experienced brokers focused on wealthy clients.
The firm currently has about 10,500 brokers and plans to make the cuts after it identifies those “who are not up to our standards,” the memo said.
The unit, called the Individual Investor Group, has long lagged its peers with critics calling for the firm to sell the division or spin it off.
“There has been some criticism that an action like this was due at Morgan Stanley,” said Sandler O’Neill Partners analyst Jeffery Harte.
John Schaefer, the head of the brokerage unit who stepped down earlier in July, will be replaced by Ray Harris, managing director and head of client solutions, on an interim replacement, the memo added.
More change is expected at retail unit once the new permanent head is named, Harte added.
The changes at the firm, which has in recent months been roiled by investors and former executives working to topple former Chief Executive Philip Purcell, were being considered before Purcell left, said a source close to the situation.
Purcell surrendered to months of pressure in mid-June and stepped aside. He was replaced on June 30 by former Morgan Stanley President John Mack who quit the firm in 2001 after losing a power struggle with Purcell over the top job.
As Mack returned to Morgan Stanley, he said some of the investment bank’s businesses, including its retail operation, were not performing as they should and need to be fixed.
In June the bank reported that earnings at its retail brokerage unit fell in the second quarter as a weak stock market drove small investors to the sidelines.
Schaefer is one of a number of Purcell allies to leave the firm since Mack has returned -- with the bank’s share price also rising 5 percent since Purcell’s departure.
