Morgan Stanley reorganizes wealth unit in bid to deepen client relationships

Big wealth managers know that one of the best ways to hold on to advisory teams and assets under management is to make sure they have multiple business relationships with clients.

A customer who has just a brokerage account with a firm can far more easily pick up stakes and go elsewhere than someone who also has a mortgage and bank account with the same institution. Industry recruiters say it's likely thoughts along those lines that have the Wall Street giant Morgan Stanley embarking on a reorganization of its star wealth management unit.

According to a recent internal memo, Morgan Stanley is setting up a new organization called Wealth Management Client Solutions. Leading it will be Vince Lumia, the current head of field management, who will retain his current role of managing the firm's more than 15,000 financial advisors while gaining some additional duties. Those will include responsibilities related to the firm's institutional, self-directed and workplace clients.

Courtsey of Morgan Stanley

The memo said the firm has been investing heavily in all aspects of its wealth management business "in order to build new relationships at scale, with the goal of migrating those relationships to our Financial Advisors over time."

The memo, attributed to Morgan Stanley head of wealth management Jed Finn, adds: "Now, at 18 million relationships and growing, we need to ensure that we are meeting clients wherever they are on their advice journey, supporting their growth, and deepening relationships over time." 

A spokesperson for Morgan Stanley confirmed the 18 million figure encompasses advisory clients, self-directed investors who trade through Morgan Stanley and clients of the Morgan Stanley at Work program, which deals with employee benefits. When reporting fourth quarter and yearly earnings on Monday, Morgan Stanley Chief Financial Officer Sharon Yeshaya said the firm added 600,000 new relationships in 2023.

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She said Morgan Stanley has enjoyed particular success with clients of Morgan Stanley at Work eventually moving over to dealing directly with advisors.

"In the prior three years, we saw an average of $50 billion of workplace assets migrate to the advisor-led channel on an annual basis," Yeshaya said in the earnings call. "This year, client migration was up 25% year-over-year despite economic headwinds. And on the product side, our financial advisors are offering clients investment opportunities such as private credit, private equity and all the other alternatives."

Making them 'stickier'

Michael Terrana, an industry recruiter and the founder of Chicago-based Terrana Group, said firms that have multiple types of business dealings with their clients are running a good defensive play at a time when top advisory teams are being heavily recruited by industry rivals or are choosing to go independent. Some types of accounts can be difficult to move. And some clients may simply prefer to stay put with a single financial firm rather than have to deal with different ones for different purposes.

"It makes clients stickier," Terrana said. "That's what it's for."

Michael King, another industry recruiter and the president of New York-based Michael King Associates, said Morgan Stanley's changes to its wealth management are likely also intended to provide "continuity" and ensure "they can keep their good people."

Courtesy of Morgan Stanley

The creation of the Wealth Management Client Solution group wasn't the only organizational change announced in Morgan Stanley's memo. The firm also said Chad Turner, who had overseen the self-directed business, was being named head of Wealth Management Platforms. The new role will have him working to simplify and unify technologies and systems used in Morgan Stanley's advisory, self-directed and workplace businesses. 

And Lisa Shalett, the chief investment officer of the wealth management division, will begin reporting to Saperstein and will take on additional responsibilities related to making sure the firm's research is available to all its clients.

"In all macro environments, and especially in periods of market change, delivering research and broad planning strategies is critical for helping clients achieve their financial goals," according to the memo.

Change at the top

Morgan Stanley's reorganization of its wealth management unit comes amid sweeping changes in the firm's upper ranks. Finn was named head of wealth management in November. He reports directly to Andy Saperstein, who himself was named head of wealth and investment management in October after being on the short list to become the firm's next CEO. 

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That top spot instead went to Ted Pick, a Morgan Stanley lifer who took over from former CEO James Gorman in January.

In the earnings call on Monday, Pick noted that the firm's wealth and investment management divisions continued to be its stand-out line of business. The units contributed 58% of the firm's total revenue in 2023 and 62% of its total profits.

Media rounds

Doing his first round of media interviews since his promotion, Pick on Thursday said he largely plans to stay the course charted by Gorman. In an interview with Bloomberg, Pick said Morgan Stanley is perhaps in the unique position of having a global investment bank married to a world-class wealth management business. That diversification has come in particularly useful in recent years when high interest rates and the resulting lack of merger and acquisition deals have weighed heavily on the firm's investment bank rivals like Goldman Sachs.

Pick told Bloomberg that one of his priorities is to further integrate the two sides of the business.

"We'd like to think we're differentiated from any of our competitors," Pick said. "We have competitors that are great wealth managers. We have a great investment bank. But to bring them both together is something special."