Morgan Stanley Limits E*Trade Customer Referrals to Specialized Brokers
Morgan Stanley’s $13 billion purchase of E*Trade Financial Corp. is less than two weeks old, but the wirehouse has already determined which of its more than 15,000 brokers have authority to seek referrals of high-end customers from the discount broker.
The program will reward advisors with clean compliance records who are primarily fee-based, use financial plans, work on teams and are top-level asset and new account gatherers, according to Morgan Stanley officials who discussed the strategy on condition of anonymity.
It also is the flip side to advisors concerned that they will lose clients to the discount broker’s platform, which the wirehouse intends to operate under the E*Trade name.
“This is an effort to reward and support those advisors who are successful, not a way to help struggling advisors turn things around,” one of the officials said.
The skeleton for the program, called the Reinvestment Network, was built last year after Morgan Stanley bought company stock-plan benefits provider Solium Capital and integrated it into its own workplace services programs. The wirehouse restricted most of its brokers from working with managers and executives of plan participants, giving prospecting privileges to a small group of advisors who now can also solicit the upscale E*Trade clients.
To continue getting E*Trade and stock-plan leads, advisors will have to demonstrate success in converting prospects. “You can get in, but to stay in you have to close the business,” the official said.
E*Trade customers will generally have to keep at least $250,000 with Morgan Stanley or have liquid net worth of $500,000 to become clients.
The Solium referral network has been a “game changer,” said a New York City advisor whose team manages $3 billion and who took a special training course because she had not previously worked with corporate stock plan clients.
“It opened up a whole new channel of business for our team,” she said.
The broker, who declined to specify the number of new accounts she had gained under the program, uses Morgan Stanley’s “Next Best Action” automated alert app to ping prospects prior to expiration of company stock lock-ups or other financial events.
Around $300 billion of E*Trade’s $600 billion of client assets are tied to corporate stock plans, according to a Morgan Stanley presentation in February. E*Trade customers also hold $3.2 trillion with outside firms that Morgan Stanley advisors will attempt to attract, it said.
Morgan Stanley expects to begin booking incremental profit from E*Trade in three years, following its projected $800 million of systems and related integration costs.
—Jed Horowitz contributed to this story.