Morgan Stanley Shows Its True Colors During COVID-19 Pandemic
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Morgan Stanley Shows Its True Colors During COVID-19 Pandemic

I had been a customer of Smith Barney for as long as I can remember, even after it merged into Morgan Stanley in 2011.

Smith Barney was always an outstanding institution to do business with.   They understood that the client always came first and went above and beyond to accommodate.   This remained true when Smith Barney was under the ownership of Citibank.  Smith Barney was the kind of financial partner that you wanted to have forever, and remained helpful to their customers even as their equity trading business trickled away to the online brokers in the end of the last decade and beginning of this one.

When Morgan Stanley came along in 2011, there was little reason to leave initially.  The structure of the program remained as it was and the people remained the same.

In the years that followed, however, the business became about selling customers esoteric structured notes, since these instruments were really the only product that Morgan Stanley could offer that weren’t available to online brokers. Structured notes would prove to be highly profitable to Morgan Stanley with the initial sale resulting in a 3 ½ commission to the broker.   But, these notes – which could be debt-based or equity-based – would almost always prove to be lousy, illiquid and a tax disaster for customers.

The tradeoff for customers became clear – if you buy structured notes, maybe Morgan Stanley would get you into that great IPO into which neither Schwab nor TD Ameritrade could provide access to.

Then, when the IPOs dried up, many customers stuck around for all of the small benefits that being a Morgan Stanley customer provided.   Now, during the COVID-19 pandemic, Morgan Stanley took to stripping those away.  When I, as a customer, suggested that it was an unfortunate time to be stripping benefits, my financial advisor could provide little help.

Adding still more fire to the pit, when I went to transfer my account from Morgan Stanley, they hit me with $265 in outbound account transfer fees.   I surveyed my contacts at other full service brokerages who told me that these fees are not viewed as standard in the industry or appropriate.   Although I have been promised a call back from Morgan Stanley with an explanation of the fees, one never came even though I had been a client for decades.

Bottom line: The COVID-19 crisis has brought out the best and the worst in people, and in companies.  

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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Comments

  • Richard Cali Jamison

    May 16, 2020

    Could not agree with the article more. Was an SB client for 40 years and my business was always valued. Now Gorman runs the place like a British company, not an American one. The first time they told me how to behave and reprimanded me for pushing back and asking real questions about their offerings, I was told to leave. Then kicked on the way out (not with fees but other obstacles). Not nice.

  • Dennis L

    May 16, 2020

    I've also had real problems with MS over the last years, but I don't quite get it. Did you just suddenly wake up and realize that they are morons and shysters?

  • Wendy K

    May 16, 2020

    What benefits? I've been there for years and never received anything but calls from brokers giving me guilt trips for not trading through them.

  • Fred Tuttle

    May 17, 2020

    Colors were showing for years. Gorman views customers as pockets to be picked. Lousy customer strategy for America. Not afraid to use my name here.

  • Bev Whelan

    May 18, 2020

    I am a customer of Morgan. Have no problems and have found them to be better and more honest that some of the other smaller full-service brokers.

  • Andrew Lawson t17

    May 22, 2020

    Entirely unclear to me why someone who writes a column for this website about savings money would have been in a full service brokerage for decades. For at least the last 2, this has been an industry that preys on lack of investing knowledge.

  • LK Jarold

    May 27, 2020

    Morgan's typical client is one who is financially naive, ill-informed and willing to be manipulated into financial products that they don't understand and that are totally inappropriate for their circumstances. Sorry that you stayed too long enough and congratulations on finally breaking free of the place.

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