Morgan Stanley Fights to Retain Muni Clients after Ousting Michigan Broker
When Morgan Stanley’s wealth management division discharged 23-year veteran Michael Holycross from its Graystone Consulting “institutional” unit last month, it knew it would have challenges.
The Birmingham, Michigan, advisor had been a go-to consultant to county and town public pension plan investment committees for years, but was dismissed without explanation on June 1, according to his BrokerCheck record. In at least one instance, a complex manager was dispatched to reassure a $1 billion account that it remains in good hands, but he said he could not give details of the dismissal because the firm hadn’t filed its U5 explanation.
“The termination of someone from their firm is not something they take lightly and it is not done arbitrarily,” the Macomb County Employees Retirement Board wrote in minutes of a session it held on June 8 with Troy Mooyoung, a complex manager overseeing Holycross’ office and three others in the southeastern part of the state. Without being specific, Mooyoung said the firm is scrupulous about protecting itself and clients from reputational or “headline” risk, noting that even taking a pension fund board member to a Detroit Tigers game could be interpreted as a “pay-to-play” strategy by a fund consultant.
Mooyoung assured the fund board that “at no point was their account or the assets they entrusted in peril,” according to the minutes, but a person close to the board said its directors considered Holycross a “very wonderful consultant” who helped steer them through the 2008 financial crisis and was eager for more information.
It now has a partial answer. According to a summary of Holycross’ record in the Central Registration Depository, Morgan Stanley discharged him for “concerns over adherence to firm sales guidelines, no sales practice violations were involved.”
Deputy Macomb County Executive Mark Deldin, who chairs the board of trustees, did not immediately respond to a request for comment. At the June 8 meeting, he remarked that he “does not want Graystone to think that because they currently have the Board’s business and they have been with Morgan Stanley for a long time that they are necessarily going to continue to have the Board’s business,” according to the minutes.
That could be a negotiating tactic given that the county had been entertaining bids for a renewal of its investment advisory contract. Deldin, in fact, expressed hope that Morgan Stanley’s representatives “left the meeting feeling a bit uneasy about their place with the Board,” according to the minutes.
The person close to the board, who had not seen the U5 language, said, however, that the option of working with Holycross elsewhere is likely to be considered. Stephen Smigiel, a trustee who is the county’s finance director, speculated that Holycross may be in a forced quiet period because of a ‘no-competition’ clause in his employment contract with Morgan Stanley, according to the minutes.
Holycross did not return several calls for comment left at his home.
Morgan Stanley’s presentation to the Macomb County pension board was reported earlier by the MandateWire newsletter.
A person representing the Charter Township of Shelby Fire & Police Pension & Retirement Board, another Michigan municipal plan client that paid Graystone a $12,500 consulting fee for the first quarter of 2017, said the board learned of Holycross’s departure shortly before its June 19 monthly meeting.
“I can tell you we’re concerned,” the person said, speaking on condition of anonymity because meeting minutes have not yet been posted. Jerome Moffitt, chairman of the pension board, did not return a request for comment.
In addition to discharging Holycross on June 1, it also dismissed four of the five members of his team, but some have been offered severance packages or the opportunity to reapply for positions, according to minutes of the Macomb County meeting. The minutes said that the Holycross accounts are being covered by the two remaining Graystone teams in Michigan, the Brice Group and Messner-Krakowiak Group.
Holycross’s group consulted on $3.5 billion of client assets as of January 2016, according to his LinkedIn profile.