Morgan Stanley reveals new details about how it's planning to add 1 million clients to its $2.7 trillion wealth business
- Morgan Stanley, the largest US wealth manager, on Thursday broke down how it plans to turn customers using its newly purchased stock-plan system into full-fledged wealth management clients.
- Over the next five to seven years the firm expects to shift more than 1 million employee participants to its wealth arm's advisory or digital channels, like its Access Investing offering.
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Morgan Stanley made a $900 million bet around its wealth management business last year. Now it's sharing new details with around how it plans to execute on it.
The New York bank's executives on Thursday explained how they are looking to convert customers already using its recently purchased stock-plan platform, ShareWorks by Morgan Stanley, into possibly lucrative full-fledged wealth management clients down the line.
The acquisition of the Canadian equity-administration firm formerly known as Solium Capital, which was announced last February and closed three months later, was Morgan Stanley's largest purchase since the financial crisis. ShareWorks, used by employees at startups like Stripe and Instacart, is now part of a larger suite of tools called Morgan Stanley at Work.
Over the next five to seven years the firm expects to turn more than 1 million employee participants to its wealth arm's advisory or digital channels like the Virtual Advisor, Access Investing, or Access Direct offerings.
That would build on its 3 million-plus client relationships, chief executive James Gorman said on a call with analysts to discuss the firm's fourth-quarter and full-year earnings results.
"We'll be able to provide a compelling offering for all our relationships, servicing the ultra-high and high net worth segment with financial advisers and more mass affluent clients with our virtual adviser or digital solutions," Gorman, who has helmed the firm since 2010, said.
The plan and the acquisition itself underscore a more sweeping, urgent focus playing out across the big business of managing money. With inexpensive introductory offerings, firms are making moves to attract a generation of young, digitally inclined customers still building up wealth with the hope of shifting them to more premium services as their situations grow more complex. Getting inside the workplace with "financial wellness" tools is one way firms are hoping to do that.
Morgan Stanley, for its part, expects to fully convert all of its existing corporate equity-administration clients over to Morgan Stanley at Work by the end of 2021 - at which time employees of the companies it serves will be able to access "financial coaching, exclusive educational content, and our self-directed brokerage offering, providing them with an introduction to our wealth management services," Gorman said.
Nearly 40% of those plans on its existing systems have been transitioned over to Shareworks. The remainder will be completed by the end of 2020, Gorman added.
When an analyst on the call asked for more details around what kind of assets-under-management growth and revenue could come with successfully drawing in new wealth management clients, finance chief Jonathan Pruzan said it's still relatively early days.
"I think we'll see sort of an acceleration, a slow build, if you will, of converting our Morgan Stanley at Work clients into either the digital or advisory channel," he said.
Pruzan said on the firm's third-quarter earnings call in October that it had won 265 new corporate clients since the deal closed earlier that year.
Gorman has emphasized that its wealth-management arm, the largest in the US with some $2.7 trillion client assets and around 15,400 financial advisers through the fourth quarter, has stabilized the firm.
With a steady stream of fees locked in from clients who will theoretically stick around for years, business are typically seen as more steady units than other areas of banks like trading, which are more tethered to markets' fluctuations.
And Shareworks is a major part of Gorman's vision for the future. "I see it less characterizing as going down market and more characterizing as just expanding the universe of clients," he said on the call.
"There are a lot of people out there, working at companies making good money through these share plans," he added. "They do not want or need one of our large financial adviser teams, that's for sure. But that doesn't mean they can't have access to what Morgan Stanley can deliver."
Devin Ryan, an analyst at JMP Securities, meanwhile isn't blown away by what these clients could do for Morgan Stanley's wealth business.
He crunched the numbers and pointed out that its 2.7 million corporate stock-plan customers hold $1.5 trillion of wealth away from Morgan Stanley. By Ryan's estimates around the 1 million additional customers it's hoping to capture, the firm is going after some $500 billion in assets held away.
"We believe a successful wallet share outcome would be around 50%, implying this could be a $250 billion-plus asset opportunity (on a current WM customer asset base of over $3 trillion) - thus, we think this would be a positive and is clearly incremental, but also not transformational," he said in a Thursday report to clients.
