Morgan Stanley Smoothing Restrictions on Eaton Vance Sales
Morgan Stanley, which is aggressively building its asset management arm, is taking steps to remove certain conflict-of-interest sales restrictions on funds and other products managed internally.
Many pension plans, which are generally serviced by advisors at Morgan Stanley’s $340 billion-asset Graystone Consulting unit, have investment policy statements prohibiting holdings of affiliated funds managed by their consultants’ companies.
“Boards are being asked to grandfather” the Eaton Vance funds, said a person familiar with the strategy advisors are pursuing. “There is a lot of noise about this but we are unlikely to see a lot of impact.”
Morgan Stanley has already taken steps to remove some conflict-of-interest prohibitions on sales of funds from its investment advisory division by its network of 15,000 wealth management advisors.
As of April 1, 2020, it began permitting sale of many Morgan Stanley Investment Management funds within fee-based advisory retirement accounts, according to regulatory filings for the funds.
Morgan Stanley had prohibited such sales to comply with the Department of Labor’s fiduciary rule during the Obama administration. The Trump administration subsequently backed away from the rule, leading many brokerage firms to loosen sales restrictions even before a federal court voided the rule.
To ensure compliance with the Securities and Exchange Commission’s new Regulation Best Interest, Morgan Stanley rebates management, servicing and distribution fees of its affiliate funds to investors who already pay a fee for their managed retirement accounts.
Morgan Stanley, the biggest distributor of Eaton Vance funds, does not disclose client holdings by fund families, a spokesperson said.
Morgan Stanley will add Eaton Vance’s $507 billion of fund assets on a pro forma basis to its asset management arm’s $665 billion when the deal closes next year.