The Investment Scientist

Do you want to be Morgan Stanley’s production?

Posted on: June 11, 2013

Morgan Stanley Smith Barney

Morgan Stanley Smith Barney

I went to a Morgan Stanley financial advisor associate recruitment meeting recently to spy on how they train their new financial advisors.

They have an extremely rigorous 36 month program. New associates are expected to pass series 7 and series 66 license testing in the first 12 months. These licenses enable them to charge both fees and (hidden) commissions. (Comparatively, my series 65 license prohibits me from charging commissions.)

As soon as they get the licenses, they are expected to go into “production.” The firm sets very tough production targets. If they fail the targets, they will be kicked out of the program.

These associates will start with a very meager salary of below $20,000 to keep them hungry. Once they start production, their salary will begin to go down to eventually zero.

When they graduate from the program, they will “eat what they kill,” 35% to 40% of all commissions and fees from their production. Morgan Stanley pockets the rest.

So what exactly is their production? It’s YOU baby!

The manager warned these potential recruits: “It’s a tough world out there. People don’t like you. They will hang up on you; they will avoid you at social events. You have to remember it’s a number game. If you hit on enough people, some of them will become your clients.”

Then, the manager brought up a successful associate to share her experience. She explained that her friends are too poor to be her clients, and her parents’ friends don’t trust her. So, she works 60 hours per week, making at least 200 cold calls a day and viola, she hits her production target. I have to admire her tenacity. But seriously, do you want to be her client?

That’s how big Wall Street firms train their new financial advisors. No wonder people avoid financial advisors like the plague.

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2 Responses to "Do you want to be Morgan Stanley’s production?"

Are those really financial advisers or are they brokers in sheepskin clothing? (I guess wolves cold-call sheep these days.)

They are brokers. But “financial adviserr” is a non-legal term. Your great great aunt can call herself a “financial adviser” and not breaking the law.

I wrote about that many years ago:

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.


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