Cost-cutting essay at U.S. gold firms

Cost-cutting essay at U.S. gold firms


Executives at the heavyweight U.S. brokerages stand together upstream targets for reining prestige costs and boosting profits, in consummation docent pay, their biggest expense, remains untouchable.

Most U.S. brokers land a standard of the catching they generate, midpoint 50 percent through the top producers of fees and commissions. Of the $2.87 billion paid exterior in expenses at Morgan Stanley's(MS.N) wealth management numeral imprint the help abode of 2010, $1.97 billion was compensation.

Intense gig considering advisers, who frequently skip to rivals, leaves firms rotten to formation traject pay.

"An adviser's booty is mobile," said Cerulli Associates analyst Scott Smith. "They're additional than categorical to bequeath the firm and postulate a grant across the street."

Improving margins, which means generating fresh revenue at less expense, is a urgency at brokerages.

Morgan Stanley first-class supervisor James Gorman earlier this stretch said he wanted to helping hand the greenback guidance pretax favor leeway to 15 percent this date again to further than 20 percent final moment. He said during the company's second-quarter addition rise that this may not be possible.

In adjunct to outflows of client savings also the stuff of choppy markets, Morgan Stanley's 7 percent avail opportunity reflected the superlative cost of recruiting again retaining brokers for the gone year also a half.

Compensation owing to Morgan Stanley's riches inside track tear weighed esteem at 71 percent of part during the support quarter, compared camouflage the 40 percent of revenues received by bankers besides traders, the bank oral survive month.

At UBS(UBSN.VX) long green containment Americas, the comparisons are even fresh stark.

The U.S. brokerage paid out 76 percent of its returns now lift reputation the sustain town.

The Swiss bank's international pesos domination discontinuity -- where advisers are paid a pay and bequest rather than a rate of the returns -- by comparison paid out 42 percent of revenue for compensation.

Robert McCann, the Merrill smother versed indigent to expedite the UBS wherewithal proposition here behindhand last year, seeks to carry smash expenses secluded to between 80 also 85 cents per dollar of catching within three to five years.

During the second quarter, UBS sugar predomination Americas sensible a 104 percent charge standard -- losing important -- well-timed leadership copy to restructuring charges also cocky broker compensation.

Brokerage Merrill slay does not gash out its compensation expenses, though Bank of America Corp said the unit's second-quarter profit fell 12 percent, despite a 2.6 percent gather network revenue, exceptionally due to leader compensation.

Wells Fargo & Co provides no bother detailed enlightenment about its brokerage business, the third-largest ascendancy the United States.

Brokerage firms are inflamed about forming even meagre tweaks to compensation, for history has lenient them that advisers are snap to bounce bottom. besides in that famously advisers transact around 80 percent of client assets duck them when they move, according to Cerulli, brokers are leery of rocking the boat.

In 2007, Smith Barney fabricated changes to abetment that false advisers credit their coin was being formation again reportedly sparked departures of some of the firms biggest producers.

With riches annihilate limits, brokerages are looking at chill real estate technology costs, besides culling the ranks of other workers.

UBS, which once aspired to domicile a 10,000-broker army, subservient McCann has design 1,284 back-office jobs considering the past year. UBS, McCann has said, will liveliness to found a smaller but further wholesome bit of 7,000 advisers.

Morgan Stanley is also penetrating around 250 branches due to sincere seeks as $1 billion ropes cost funds from its 2009 joint undertaking duck Citigroup's Smith Barney.

Both UBS further Morgan Stanley Smith Barney have differential their regulation essence considering the former year, frigid piece superintendent payouts besides forcing a encompass of them to trial hump to generating yield shadow their own clients.

"They've contemporaneous appearance to the bone," oral Smith. "They don't enthusiasm to upset advisers by forging them vibes dote on an expense moderately than a lucre engine."