Morgan Stanley layoffs spare 'recession-proof' wealth jobs

Bloomberg News

As one financial giant after another announces layoffs, Morgan Stanley's decision to spare jobs in wealth management suggests financial advisors will occupy a calm eye in the middle of the economic storm. 

The investment banking giant announced global layoffs of around 2% of staff Tuesday, or around 1,600 of roughly 82,000 employees, according to a report by CNBC that cited unnamed sources with knowledge of the matter. However, the report said, financial advisors in the firm's wealth management business would be among the few spared from the trims. 

Reached with questions, Morgan Stanley declined to comment. 

A search on LinkedIn Thursday for open positions, filtered by company for "Morgan Stanley," showed that out of 1,385 open positions, at least 48%, or nearly half, were for roles in wealth management. In other words, the firm appears to be planning advances for its wealth business even as it culls other positions in trading and investment banking. 

Some 292 of the LinkedIn postings are for a "Financial Advisor Associate," while another 238 are for a "Financial Advisor." The company also posted 39 openings for a "Private Wealth Management Specialist," 38 for a "Wealth Manager" and 56 openings for a "Wealth Management Associate." 

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What's emerging as an employment safety net for top wealth advisors comes as the past summer's hot talent market for workers across industries hits the brakes. At Morgan Stanley, the layoffs follow comments by CEO James Gorman on Dec. 1, first reported by Reuters, that the institution would make "modest cuts" as it adjusts to markets dogged by elevated volatility, inflation and geopolitical instability.

"Some people are going to be let go," Gorman said at the Reuters Next conference last week, adding that it was "​​what you do after many years of growth." 

Nevertheless, Morgan Stanley appears to be doubling down on its years-long conversion to wealth management as its principal line of business under Gorman's leadership. In its third quarter earnings call, in which it reported $65 billion of net new client assets — $260 billion for the year to date — Gorman called wealth management "an unbelievable revenue machine" for the company and echoed projections made earlier by the firm's head of wealth management that the bank aimed to reach $10 trillion in client assets, on average $1 trillion every three years, within the next several years. Wealth management accounted for about half of the bank's total revenue in the third quarter.

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Other investment banks, including Citi and Barclays, also recently announced layoffs, putting an end to talent wars earlier this year at the height of the "Great Resignation." Goldman Sachs said Tuesday more layoffs, as well as bonus cuts, were likely, on top of cuts it made earlier this fall. Rival powerhouse Bank of America, the parent of Merrill Lynch, said Tuesday it would slow hiring. 

Wall Street leaders from Morgan Stanley Wealth Management's CIO Lisa Shalett to JPMorgan Chase's CEO Jamie Dimon expressed concern in public remarks this week that the markets would sink into recession in 2023.   

However, financial services institutions large and small have been getting into the wealth management game, hoping to grab a piece of the enormous pie that is wealthy and ultrawealthy people's assets. 

That coveted segment appears, at least at the moment, to be shielded from the woes plaguing inflation-weary consumers on Main Street and from the slowdown in M&A deals on Wall Street.  

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Wealth management executive recruiting consultant Mark Elzweig said in an interview that the treatment of financial advisors  reflected their unique place in the corporate balance sheet, compared with that of other bank employees. Whereas banking staff generally are salaried, representing a fixed operating cost that banks want to contain, advisors tend to be paid in proportion to revenue they bring in from managing client assets. 

"There are always wealthy people with pools of money, and they need advice. So it's not something that's going to go away because markets are difficult," Elzweig said. Even with assets and fees declining, client interest in wealth management is expected to grow. "Many financial advisors are adding people that were formerly do-it-yourselfers, because people in difficult times need financial advisors even more," Elzweig said.

"One of the glories of being a successful financial advisor is that it's essentially a recession-proof job," he added.

"That's the difference between an employee revenue generator and an employee who's part of corporate overhead."