Morgan Stanley plans to fire 200 to 300 poorly performing brokers and trainees, a person familiar with the plan said on Wednesday.

The company's Morgan Stanley Smith Barney unit would remain the biggest brokerage force in the U.S. after the cuts, with about 17,800 financial advisers. The New York-based firm ended 2010 with 18,043 brokers.

A spokeswoman at Morgan Stanley declined to comment.

The cuts come as Morgan Stanley moves to imprint its culture more strongly on a brokerage force that almost doubled in size in June 2009 when it took a controlling stake in Citigroup's Smith Barney brokerage network.

Morgan Stanley is considering dropping the Smith Barney name from the joint venture, according to published reports. It also recently elevated Greg Fleming, a former investment banker who runs its asset management business, to replace Smith Barney veteran Charles Johnston as president of the brokerage unit. Johnston has announced his retirement from the firm.

For months after the Smith Barney merger, dozens of branch managers who lost their territory to Morgan Stanley colleagues left the company. Departures of managers and brokers have since stabilized, in part because of retention deals that Morgan Stanley and its rivals have been offering.


The company continues to actively recruit brokers from other firms, according to industry headhunters, and also has reinstated a training program that was in hiatus prior to the merger.

Brokers throughout the securities industry tend to leave big firms at a rate of about 5 to 10 percent a year, and Morgan Stanley executives have said they intend keep the brokerage force in a stable range of 17,500 to 18,500 advisers.

They may just be getting rid of the dead weight in order to make room in the program for the new batch, said Courtney Raymond, a Houston-based recruiter.

One marketing benefit of culling the lowest producers is that firms can quote higher average revenue generation per broker in reports to investors and in recruiting. The average Morgan Stanley broker last year generated $742,000 of revenue, up from under $700,000 in 2009.


In firing trainees -- people who have been with the firm for up to 36 months -- Morgan Stanley is moving quickly to identify people who it thinks won't make the grade. The firm brought in about 2,000 trainees last year, according to recruiters, and is keeping the program active.

Morgan Stanley and its rivals pay on a grid system that allows brokers to retain more of their clients' commissions and fees as their production rises. Experienced advisers with persistently low production appear to be a target of the new round of cuts.

Brokers with five years of experience who generate only $75,000 a year in fees and commissions are likely to be fired, said the person familiar with the new plan.

Bank of America Corp's Merrill Lynch, the second largest broker by number of advisers, has a plan to cut 10-year veterans who generate less than $250,000 in annual fees and commissions after a year of probation, according to a source [ID:nN28193703]. A Merrill spokeswoman said the company has minimum performance standards but did not verify the report.

They haven't done that in a while, Danny Sarch, a recruiter in White Plains, New York, said of the Morgan Stanley plans. They have just cut their payouts to the point where (brokers) quit.

Neither Sarch nor Raymond have Morgan Stanley as a client.

(Reporting by Joseph A. Giannone and Helen Kearney; Editing by Jed Horowitz and Matthew Lewis)