Morgan Stanley, Wells Executives Laud New Trends in Cultivating Clients
New goals-based planning tools Morgan Stanley is incentivizing advisors to use are helping it capture assets that customers have been keeping at rival banks and broker-dealers, a top executive said this week.
Morgan Stanley last year integrated BlackRock’s Aladdin software into brokers’ workstations, a risk-management tool that encourages customers to show their brokers assets “held away.” The company estimates that customers keep around $2 trillion in assets at other firms, some of which can be captured by using artificial intelligence-generated client messages to win over clients and better presentation tools like Aladdin.
“Clients are more willing to consolidate their assets if they feel like they are getting value for the service,” Morgan Stanley Chief Financial Officer Jonathan Pruzan said at a Credit Suisse conference for financial company investors on Tuesday. “Where you will ultimately see that is in flows….assets we manage both in total and on the advisory side.”
He declined to provide specific numbers about progress in attracting new assets. The company ended 2018 with $2.3 trillion of customer assets, 3% lower than 12 months earlier. It attributed the decline to the year-end market turmoil.
Pruzan’s comments about using financial planning to impress customers and gather their assets reinforced an earlier presentation at the Credit Suisse conference by Wells Fargo & Co. Chief Financial Officer John Shrewsberry.
“It’s harder and harder to find as many clients who are interested in full-service brokerage,” he said in explaining why Wells Fargo Advisors is urging advisors to pivot from traditional stock-picking. “We’re putting all our resources in front of the customer to help them understand where they are and where they are going and provide things that people value and will pay for.”
The shift from stock-jockeying to financial planning is still an experiment, he said.
“Exactly how that is delivered compared to the status quo is something where I don’t think the nut has been cracked,” Shrewsberry said.
Morgan Stanley’s planned $900 million acquisition of stock plan administrator Solium Capital announced on Monday illustrates the new customer cultivation strategy, Pruzan said.
The idea is to build relationships with younger “emerging investors” who work at companies using Solium for stock-plan benefits by offering education on retirement planning, financial wellness and other wealth management services. The firm hopes to convert them to investment customers using call centers and its robo product in their early years, then shift them to financial advisers as their wealth increases.
“Longer term, this is critical for us,” Pruzan said.
Meanwhile, market and geopolitical forces are helping the firm rebuild wealthy clients’ engagement with the markets. They have put a “good chunk” of cash back to work after pulling a record amount of money out of the market amid December volatility, he said.
They are responding to a more-than-10% rise in the Standard & Poor’s 500 stock index year-to-date, the Federal Reserve’s pause in raising rates and the possibility of a truce in the trade war with China, Pruzan said.
Because Morgan Stanley has made a bigger bet than its big-bank rivals on wealth management —the division outpaced its capital markets and investment banking units last quarter in both profits and revenue—it has urged investors to use wealth management profit as a key indicator. Pretax profit margin at the wealth management division in last year’s fourth quarter fell to 24% from 27% in the third quarter and from 26% for the full year.
“Our clear expectation is a rebound in the margin from where we were last quarter,” he said.