Cost-cutting battle at US wealth firms

Managerial at the big US brokerages set ambitious goals for reining in costs and boosting income, up till now adviser pay, their biggest expense, remains impervious.

The majority US brokers obtain a percentage of the revenue they make, nearly 50% for the top producers of fees and commissions. Of the USD 2.87 billion paid out in operating cost at Morgan Stanley's wealth management component in the second quarter of 2010, USD 1.97 billion was compensation. Powerful competition for advisers, who frequently jump to rivals, leaves firms powerless to cut back pay.

"An adviser's revenue is mobile," said Cerulli Associates analyst Scott Smith. "They're more than willing to leave the firm and accept a check across the street."

In 2007, Smith Barney complete changes to recompense that made advisers think their pay was being cut and reportedly sparked departures of some of the firm’s biggest producers. With pay off limits, brokerages are looking at wounding real estate technology costs, and culling the ranks of other workers.

UBS, which on one occasion seek to build a 10,000-broker army, under McCann has cut 1,284 back-office jobs over the past year. UBS, McCann has said, will work to create a smaller but more profitable force of 7,000 advisers.

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