Making peace in age old war between bankers, traders and brokers

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People tend to think of the main fault line within a top investment bank as dividing traders from bankers, a storied divide on Wall Street, one famously depicted in Greed and Glory on Wall Street, the classic account of the fall of Lehman. But there is another great divide, one that make partners of bankers and traders as they together sneer at poor retail brokers.

Traders and bankers have long dripped with condescension over anyone that works retail accounts, but it has to be said that retail brokerage is a much more stable business, and you can't blame Morgan Stanley for emphasizing retail. The business model depends on the steady returns that unit will hopefully generate.

So it is not surprising, as DealBook reports, that the bank is bent on finding more synergies between the investment bank and the retail brokerage unit. Morgan Stanley ($MS) is in the process of acquiring all of Morgan Stanley Smith Barney from Citigroup ($C).

"Gregory J. Fleming, the chief of the brokerage business, and Mr. Kelleher have been under pressure from shareholders to coax greater profits from the low-margin brokerage business by finding ways for retail and investment banking to work better together. The two men are said to have a good working relationship, leading to renewed optimism that the company can finally find synergies among its various divisions," Dealbook  noted.

The question remains as to what meaningful synergies are left. The IPO market comes to mind. When the market was hot not too long ago, retail access was a huge deal for brokers and bankers alike.

Management has apparently put together a list of 35 areas of possible cooperation. The biggest issue may be lending. Commercial bank-owned brokerages have been able boost lending to clients, and many see that as a huge advantage over brokerages owned by investment banks, which are disadvantaged from a lending point of view. Finding ways to delivering low-cost loans may end up being the top priority.

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