Fidelity, Schwab, Morgan Stanley and Vanguard surpassed all others in new assets under management (AUM) in 2022. Three of those four are household names that probably surprised no one. But Morgan Stanley?

“Study these firms. They are different,” Chip Roame, CEO of Tiburon Strategic Advisors, told the latest Tiburon CEO Summit. (Listen to Roame’s state-of-the-industry perspective on my WealthTech on Deck podcast.)

He ticked off their results: Fidelity’s new assets were $466 billion, while Schwab raised $428 billion, Morgan Stanley $311 billion and Vanguard $189 billion.

Morgan Stanley stands apart from the other three in meaningful ways in its:

• Shrewd business strategy.

• Longstanding and continuing investment in a coordinated technology ecosystem.

• Focus on minimizing taxes, managing risk and maximizing retirement income.   

I picked them as the leader in the race to become the first Amazon of financial services. And the results Morgan Stanley Wealth Management has delivered position its leader, Andy Saperstein, as a possible (in my opinion, likely) successor to James Gorman as CEO.

The Leaders’ Path To New AUM
“All of the big four are betting similarly on some big trends,” Roame said, naming them:  

1. Discount Brokerage Services
Each firm understands there’s a strong pull in making investing easy and cheap and getting good service and advice. It’s also a starting point for the waves of Gen Z and millennial investors.

“Each firm gives good advice and help—they're not order takers anymore—but still (new AUM) is coming to their retail brokerage,” Roame said.

2. Managed Accounts
“Seventy-five percent of Morgan Stanley’s new client assets go into managed accounts,” Roame said. “Schwab and Fidelity both support the RIA movement, which is all managed accounts. And at Fidelity, you’re building the biggest robo-advisor and hybrid digital advisor in PAS, Portfolio Advisory Services.”

3. Workplace
Workplace retirement is Ellis Island for new investors. It’s where they’re inducted into retirement savings, incented through matching programs, and increasingly offered “financial wellness” programs and ideas for marrying qualified and taxable accounts to improve after-tax results.

Everyone recognizes the bona fides of Fidelity, Vanguard and Schwab in the workplace. Morgan Stanley is a newer entrant. In a recent podcast, Brian McDonald, head of Morgan Stanley at Work, described their workplace strategy, which spans equity compensation (their market share is over 50%), financial wellness and empowerment and retirement plans.

Morgan Stanley Is Gaining On Fidelity, Schwab And Vanguard
Morgan Stanley has an evolving platform unique in the industry and is poised to gain more ground. Morgan Stanley engages consumers where they live and work by:

• Offering comprehensive, sophisticated digital and human advice on full household portfolios (J.D. Power says this yields higher client satisfaction).

• Fully coordinating the mass of technology they’ve built and bought.

• An increasingly smooth client/participant and advisor experience; and,

• Delivering what matters most—better after-tax outcomes across the household portfolio no matter which Morgan Stanley business the customer first engaged.

As we know—it’s not what you make, it’s what you keep. Morgan Stanley delivers tax alpha no matter which door you enter.

Roame’s ‘Crystal Ball’
I asked Roame about future trends. He listed three:  

1. Firms will continue to move from selling products to providing solutions. “It's a little sad we're just discovering solutions,” Roame said, adding, “Every money management firm now talks about, ‘Well, no longer do we sell asset classes. We now sell solutions.’ Well, you probably should have sold solutions the entire time.”

2. There will be a collision of businesses now considered discrete. Financial planning and investments, retirement and retirement plans, and healthcare and wellness. “In ways we don't see today, all these are one industry 10 years out,” Roame said.

3. Advisors evolve from money managers to coaches. Boomers and their parents were happy to “give their money to some dude to manage it for them,” but succeeding generations are not, Roame said.

“I think the Gen Xers and millennials are looking for a coach who prods them along, maybe to do things themselves mostly, but keeps them on track and makes them accountable.”

And those clients have clout, with the looming transfer of wealth—$84 trillion will pass to Gen X and millennials, $16 trillion within the next decade, according to The New York Times.

Established firms, like Edward Jones, are preparing advisors for the changing psychographics of their clients. Upstarts have ideas, too. Playbook, a new platform for young investors, charges a flat monthly fee for financial planning and helps sort priorities for savings, spending and how to maximize tax savings and after-tax outcomes.

Wealth And Taxes
Roame agrees that limiting tax drag on portfolios at every stage of life is something that firms must latch onto to grow AUM and retain those assets longer.    

It doesn’t work when clients own a collection of uncoordinated products and accounts at different firms. They need those accounts managed as a household portfolio. It’s a formidable challenge, but there are ways to use the unified managed account (UMA) platforms firms have built to get started today.

Most firms apply principles of tax alpha in limited ways to select transactions or trumpet products like direct indexing. Morgan Stanley is the exception. They own the direct indexing leader, Parametric. But they also know it’s vital to coordinate all the ways to generate tax alpha to limit tax drag on the financial outcomes for their clients, advisors and their firm.

Jack Sharry is co-chair of MMI's Digital Advice Community and a member of the Next Chapter Executive Leadership Advisory Board. He hosts the WealthTech on Deck podcast and is executive vice president at LifeYield.