More than $6.5 billion (4 billion pounds) in client assets managed at Morgan Stanley's U.S. brokerage may be walking out the door after two top-ranked private wealth advisers left the firm in California.
Rebecca Rothstein and Palmer Murray, who departed separately this month, mark the latest defections of major rainmakers from Morgan Stanley Wealth Management, the brokerage partially owned by Citigroup . The firm has been the target of rival firms hoping to win over advisers frustrated with technology glitches and cultural clashes resulting from the merger, according to industry recruiters and advisers interviewed by Reuters.
While movement of advisers in the brokerage industry is natural, very rarely do multiple advisers managing billions of dollars each in client assets leave a firm within the span of two weeks, industry experts say.
"It's an extraordinary loss, and an extraordinary gain, depending on what side of the fence you're on," said New Jersey-based securities attorney Tom Lewis, who works with top brokers transitioning to new firms.
Both Rothstein, a managing director based in Beverly Hills, and Murray, an executive director based in Los Angeles, had been with the firm for more than a decade and were a part of the company's private wealth management group, which caters to ultra-wealthy clients with at least $20 million in assets.
Their departures follow on the heels of New York-based adviser Jonathan Madrigano, also a private wealth adviser who managed $2 billion in client assets and left Morgan Stanley in late September for J.P. Morgan Securities.
When an adviser with as much time in the industry makes a move, he or she often brings most of their clients - and their assets - with them to the new firm, according to recruiters.
Morgan Stanley confirmed the departures but declined to comment further.
Rothstein, who managed about $2.5 billion in client assets with her team, moved to Merrill Lynch's private banking and investments group. She was a top rainmaker at Morgan Stanley and named to Barron's 2012 list of top women advisers, ranking No. 2 - a position she has held for the past three years.
She moved with veteran adviser Mark Varo, also a managing director, and two of her sons, Evan and David Rothstein, who are also advisers on her team.
Rothstein was also a well-respected adviser at Morgan Stanley and close to Chief Executive James Gorman, according to sources. She had spoken directly to Gorman on behalf of a group of several dozen top advisers who drafted a letter to the CEO, outlining their concerns, two sources familiar with the conversation said.
Murray, who has been in the wealth management industry for two decades, joined Beverly Hills-based Lourd Capital Management. He was a top-ranked adviser at Morgan Stanley and managed $4 billion in client assets in 2011, according to a Barron's ranking of top financial advisers from that year.
Lourd Capital, which confirmed the hire on Monday, said in a statement published on its website that it intends to "rebrand and rename the firm to reflect Mr. Murray's addition."
Murray, who had been at Morgan Stanley for 15 years, also previously worked for the Trust Company of the West.
He was joined by adviser Annie Shieh, who will be a portfolio manager at Lourd Capital. Shieh had worked with Murray for more than 13 years, also at Morgan Stanley.
With these latest departures, at least 196 veteran advisers who managed more than $32 billion in client assets have left Morgan Stanley Wealth Management so far this year, based on moves tracked by Reuters.
Reuters follows the movement of individual advisers and teams that manage $100 million or more in client assets, which typically translates into $1 million or more in annual revenue production.
(Reporting by Ashley Lau in New York; Editing by Gary Hill, Bernard Orr)