Loss Of Massive $1.7 Billion Team Raises Questions About Morgan Stanley's Quality-Not-Quantity Strategy

Wednesday, November 09, 2011 08:15
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Loss Of Massive $1.7 Billion Team Raises Questions About Morgan Stanley's Quality-Not-Quantity Strategy

Tags: Morgan Stanley

Morgan Stanley has portrayed itself as being interested in keeping only the biggest advisors and letting the "lesser" lights go. It's hard to reconcile that with its failure to keep one of the biggest teams of all from leaving.

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The Desai Group, which manages $1.7 billion and accounts for around $8 million in annual production, just switched to UBS after years with Morgan Stanley.

 

Ajay Desai and his squad are some of the best advisors in the Chicago area -- if not the world -- when it comes to courting and keeping the ultra-high-net-worth clients that Morgan's "quality over quantity" strategy allegedly wants to capture.

 

Granted, Morgan will probably announce a new $1 billion recruit from one of the other wirehouses to replace the loss. It's happened before.

 

But if the $1 billion operations are now as fluid as everyone else in the industry, the question is really what the net win is for Morgan here.

 

Focusing on the biggest advisors may help its recruiters work more efficiently. After all, if you're only chasing the most profitable affiliates, you can skip some of the hard work of finding and polishing diamonds in the rough.

 

But lately, they're not retaining the talent they have well enough for their recruiters to make up for the AUM fleeing from the top.

 

And on the bottom, the smaller advisory outfits that Morgan's effectively told to leave are in fact leaving.

 

I'm not sure net losses on the top and deterioration on the bottom is victory here. But it might be an opportunity for everyone else to see if those unwanted advisors in Morgan's depths are eager to go somewhere that will help them grow.

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