Morgan Stanley CEO Scraps Buying UBS Brokerage Arm
After a series of internal discussions, Morgan Stanley (NYSE:MS) chief executive James Gorman has ruled out a purchase of the brokerage arm of UBS Group Americas (NYSE:UBS), believing that the wealth management arm would be too expensive and that Morgan Stanley doesn’t need to add significant numbers of brokers, the FOX Business Network has learned.
Morgan Stanley is regarded as Wall Street’s top firm based on number brokers with more than 16,000 financial advisers, while UBS is ranked No. 5 with more than 7,000. A combination of the two would create a wealth management behemoth that would far exceed the size of the No. 2 player Bank of America’s (NYSE:BAC) Merrill Lynch which has a salesforce of more than 15,000.
Such a colossus deal was once appealing to Gorman, according to people who know his thinking. UBS, for its part, has weighed a sale of its brokerage firm amid a larger downsizing of the Swiss bank’s US operations. UBS brokerage chief Robert McCann has been slashing costs at the wealth management unit that he has headed since 2009.
But more recently, Gorman has all but ruled out approaching UBS for a deal, concluding that UBS would demand too high of a price for the unit, and that by attracting talent in a piecemeal fashion, Morgan Stanley can achieve its wealth management growth strategy of attracting assets from rich investors.
A spokeswoman for Morgan Stanley declined to comment. A spokesman for UBS had no comment on the matter but added that the brokerage unit “is not for sale.”
Morgan Stanley became Wall Street’s top brokerage firm after its 2009 purchase of Smith Barney from Citigroup (NYSE:C), which was looking to shed assets and recoup losses sustained during the financial crisis.
With that, Gorman has made the brokerage business—or selling investments to small investors and high-net-worth individuals—the centerpiece of the firm’s business model, which once focused largely on taking risk in various markets through trading.
Around the time of the Smith Barney purchase, Gorman was approached by executives of UBS for a possible deal, but declined, according to people with knowledge of the matter. Since then, he has discussed the possible brokerage acquisition internally with senior executives, but those discussions did not progress beyond the conceptual phase, these people add.
“James knows that the costs would be too high and the firm doesn’t need 7,000 brokers to do what it needs to do,” said a senior executive at Morgan Stanley.
Morgan Stanley shares are little changed this year trading around the $39 level.