John Mack is going back to the chopping block. After cutting about 7,000 jobs at Morgan Stanley last year, Mack is preparing to announce cuts in 1,500 to 1,800 jobs, according to Deal Journal. That’s about 3% to 4% of its work force.
It’s not clear which areas will feel the worst of the cuts. Morgan Stanley’s previous cuts have slashed deep into its fixed income trading. And the Journal says that Mack isn’t cutting any jobs in the front office brokerage business. Back office support for Morgan’s brokers, however, could get hit hard.
Morgan Stanley’s cuts wouldn’t include any moves in global wealth management, where the company’s brokers are getting ready to merge with Citigroup’s Smith Barney unit. Morgan Stanley has cut back especially deep in areas that used to take a lot of risk with the company’s balance sheet, a strategy that went out of fashion a few quarters after the housing market peaked.
For the people who support Morgan’s 8,400 brokers, the deal to create a new joint venture with Smith Barney will likely lead to job cuts. It also might bring retention payments for top-producing brokers, a common practice when retail brokerage forces merge. It is unclear whether such bonuses will be as generous as they were in past deals, when times were better on Wall Street.
As a historical note, we’ll point out that this is a huge about face for Morgan Stanley and John Mack. Only a few years ago, Morgan was dramatically slashing its brokerage business. Higher margin businesses, particularly stuff related to trading now toxic securities, were seen as the wave of the future. The wave crashed, of course. And now Morgan is once again trying to rebuild the brokerage it spent the better part of the decade dismantling.
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