No matter where investors begin on the wealth management spectrum—as do-it-yourselfers, passive 401(k) investors, robo-advisor devotees or call center clients—Morgan Stanley Wealth Management wants them. Jed Finn, the firm’s firebrand chief operating officer, said that if he does his job properly, investors should end up funneling all or most of their assets into Morgan Stanley.
“If we don’t provide all of these options, someone else will,” Finn told attendees at the Next Chapter 2022: Rockin’ Retirement virtual conference on Tuesday. Next Chapter is a joint venture produced by Financial Advisor, the Execution Project and the Money Management Institute.
“Back in 2019, we thought the industry was moving toward consolidation and we wanted to be the consolidator, not the consolidated,” Finn said. “As a result of strategic consolidation and the capabilities we bought and built, we’re now sitting at just shy of $5 trillion as of first quarter 2022.”
“We can triple the size of the firm without adding a single new relationship. It’s a really exciting time for us because the growth opportunity in front of us has grown even faster than the asset base has,” added Finn, who said Morgan Stanley has gone from 2.5 million clients to 15 million relationships from across all age and wealth levels, people attracted to the wealth management broker-dealer’s different service models.
The wealth management B-D, which garnered $438 billion of net new assets last year, is parlaying the value of all its acquisitions—including E*Trade, bought in 2020, and Solium, a stock plan administration business it acquired in 2019—to nudge clients at all levels of wealth toward its advice offerings.
With a firm belief that the future of wealth management is a marriage of the best-in-class technology and best-in-class advice, the firm’s goal is to support all aspects of the advisor and investor relationship.
On the workplace retirement plan side, Morgan Stanley has added over 700,000 new corporate plan participants in 2021.
“We think of this as a big asset acquisition funnel,” Finn said. “That starts either in the workplace or with the self-directed investor on the E*Trade platform, but ultimately is designed to end up in a full-service advice relationship.”
Before the Solium acquisition, Finn said Morgan Stanley had heard from companies that loved its advisors, but thought the firm’s retirement plan software was lagging that of competitors. He said company executives told him, “‘We love what you’re doing, but if you don’t fix it, it’s going to be hard for us to continue to partner with you.’”
Solium’s Shareworks platform now provides a cloud-based solution that creates a convergence of wealth management and full-capacity defined contribution plan options. “It’s generating extensive new net assets, and we’re still in the process of integrating all these pieces,” Finn said.
The firm also recently formed partnerships with Empower Retirement and Vestwell, both in the retirement plan record-keeping business, and Wilson Sonsini, a law firm that specializes in private company investments. The marriage of these services with workplace retirement plans and wealth management services creates a map “that leads back to our asset funnel,” Finn said.
Beyond the workplace market and the E*Trade platform that serves self-directed investors, Morgan Stanley also provides a digital advice offering and a remote advisor model. High-net-worth clients can work with advisors, while ultra-high-net-worth clients get personal wealth advisors who specialize in the market of households with $20 million or more. And for families with a hundred million to a billion-plus, Morgan Stanley launched a family office offering two years ago that has grown from $0 to $25 billion in two years.
“There is a big pipeline of interested clients who are incredibly receptive to the idea of combining a best-in-class investment banking and institutional coverage regime with a best-in-class wealth management capability, all under a single contract, all on a single platform that can bring in assets and advise on assets held away, and that’s something that we’re really excited about,” Finn said.
The wealth management platform has been designed to hold multiple accounts, be tax smart about investments and withdrawals, and be risk aware, which makes it attractive for both advisors and investors, he said.
Not every client is ready for a full-service relationship right now. “And that’s totally fine, but by building relationships early, we think it increases the likelihood we will retain those assets when it’s time for them to consume that advice,” Finn added.
Finn said when the firm was putting together the E*Trade acquisition, the executives at the firm were concerned and said, “‘Well, you can’t touch our most active traders, because these are the ones who have driven all the economics and they self-selected to be at a self-directed platform, trading themselves.’”
But as it turns out, “as we’ve exposed them to the resources of Morgan Stanley, whether it’s access to best-in-class advisors or some of the differentiated products that E*Trade hadn’t had access to before such as donor-advised funds, the biggest users of this, the people who raised their hands and brought money over, were the active traders,” Finn added.
Just because you’re an active trader on a specific platform doesn’t mean you’re an active trader for life, the COO said.
The traditional notion that there are only static self-directed investors, validators and delegators doesn’t hold up over time, Morgan Stanley’s own research has shown, according to Finn.
Investors have different preferences for advice consumption and different risk budgets “and we need to be able to deliver all of it or someone else is going to. So, core to the strategy from a service perspective is to make sure we can meet clients where they are across the spectrum,” he said.
That makes Morgan Stanley Wealth Management a hard act to go toe-to-toe with, said Finn, who admitted analysts have a difficult time pigeonholing the firm at this point.
“Are we an investment bank? No, because we have a massive wealth management business. But we also have investment management capabilities that have grown significantly,” he said.
“I think if you put it all together, we’re in the advice business and we can provide advice to clients whether they’re institutional or individuals or governments. And there aren’t really any other firms that can match all our capabilities,” Finn said.