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.