“As if times were not tough enough for stockbrokers in a bear market, now more of them are being laid off,” writes Patrick McGeehan in today’s New York Times.

“Morgan Stanley is dismissing about 750 of its least productive brokers by the end of the year and closing some of its branches as the firm retrenches from the rapid growth plan it adopted a few years ago, executives said yesterday. After eliminating the brokers, Morgan Stanley will have about 12,000 brokers in the United States, down about 16 percent from a peak of 14,300 in the summer of 2001.”

“Rumors have been circulating on Wall Street that the firm will lay off 10 to 20 percent of its brokers, but John H. Schaefer, president of the brokerage unit, called those numbers far too high. He said the brokers being dismissed were “chronic underperformers” who generated only about 2 percent of the unit’s revenue.”

“Morgan Stanley is planning to eliminate more than 10 percent of the space it has for brokers in its 500 branches, he said. The firm measures space in “seats”; all told, it will eliminate a few thousand seats for brokers, but most of them are empty, either because of attrition or because they were never filled. Reducing that space will save the firm some money on rent.”

“Brokerage firms rarely lay off brokers because employing them costs relatively little and those who do not earn a healthy income usually give up on their own.”

“But Morgan Stanley, deep into a slump in the stock market, is under pressure to reduce costs in its brokerage operation, formerly known as Dean Witter. ‘This is an unusual situation, maybe a unique situation,’ said Guy Moszkowski, an analyst at Salomon Smith Barney.”

“Morgan Stanley has to cut brokers quickly because, unlike its main competitors, it continued hiring well past the end of the bull market, Mr. Moszkowski said.”

“The moves are a prelude to a push by the firm to tailor its brokerage services to customers based on their wealth and investing habits, said Stephen Liguori, the unit’s chief marketing officer. The firm is also changing the way it trains brokers to put more emphasis on advising clients on achieving their financial goals and less on selling them the firm’s mutual funds, Mr. Schaefer said.”

” ‘The big disconnect we have is with what the historic Dean Witter was all about,’ Mr. Schaefer said, describing those customers as distinctly middle class. ‘We’re trying to move the business to where the Morgan Stanley brand has always been.’ “