Morgan Stanley Wealth Management Growth Bolstered by Workplace Unit

Morgan Stanley is counting on its workplace solutions to help it reach a benchmark of $10 trillion in total wealth management client assets, the New York-based financial services giant emphasized on its fourth-quarter earnings call Tuesday.

Ted Pick

Morgan Stanley at Work’s offerings, which include defined contribution consulting and financial wellness solutions, make up a key pillar of the firm’s “three-channel” strategy, adding to adviser-led and self-directed client pools, according to comments made by CEO Ted Pick on his first earnings presentation as head of the firm.

“We see continued opportunities to drive growth and are steadfast in our goal of reaching $10 trillion in total client assets,” Pick, who replaced former CEO James Gorman this month, said on the call. “In wealth management, we have established ourselves as a leading asset gatherer by expanding our business model across three channels: adviser-led, self-directed and workplace. The business generated $1 trillion of net new assets over the past three years, and we are relentlessly focused on sustainable growth.”

The firm was overseeing $6.6 trillion in total client assets as of the end of 2023, according to a presentation that accompanied the earnings call.

Overall profit for the final quarter of 2023 dropped 32% to $1.5 billion in Q4, according to the earnings release. That came from revenue of $12.9 billion, up 1% from a year ago in the same quarter, with wealth management’s share “essentially unchanged” from a year ago at $6.6 billion, according to the firm.

Morgan Stanley formed its workplace-focused division in 2019 after the acquisition of Solium Capital Inc., which provided equity administration, financial reporting and compliance services to employers. Since that time, the firm has announced enhancements and upgrades to its equity, financial wellness and retirement services offerings in the workplace unit. It also owns Graystone Consulting, an institutional consulting division engaged in both workplace investment and retirement plan advisement.

On Tuesday’s earnings call, Pick noted the importance of the workplace solutions team engaging on everything from overall strategy for business owners and executives down to individual wealth management for employees.

“Our premier corporate franchise spans every business segment, with clients at the center of everything we do,” he said. “We cover their broad range of needs, from advising the C-suite on strategy, to helping them raise capital and hedge risks, on through to advising the broader employee base through our workplace offering. … We can deliver best-in-class institutional capabilities paired with sophisticated wealth management solutions in an integrated service model.”

The financial services firm also reiterated its ability to convert workplace businesses to its wealth management advisers.

“In the year, we grew client relationships by over 600,000 across the franchise. This was led by success in the workplace channel, as we continue to win corporate plans and add participants in stock plans,” Sharon Yeshaya, executive vice president and chief financial officer, said on the call. “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. This year, client migration was up 25% year over year, despite economic headwinds.”

Yeshaya noted while responding to questions that workplace assets that move into the wealth management division are often coming from external assets.

“We’re seeing new clients come to Morgan Stanley, so it’s not just attracting assets held away, but you’re getting new clients from those participants. … The workplace assets that move over, 80% of those [workplace] assets are actually assets that are coming from outside the institution,” she said. “You’re bringing new clients in, and then they’re bringing their assets that are sitting away into the institution. I think we’re well positioned to capture those opportunities.”

Pick reiterated the potential for the workplace solutions division to help Morgan Stanley reach its client advisement targets.

“We will hit that $10 trillion number,” he said during questions. “Part of it is to allow for some of this latency, if you will, on assets held away, on assets working their way through workplace. … We will allow for some time for those assets to convert. But the key, of course, is to have them in-house and then, as well, to see that folks who are our new workplace customers have assets held away in other existing brokerage accounts that they bring them to the firm as well.”

The earnings are the first with Pick as CEO after he took over from Gorman this month. The succession plan was announced in October 2023, with then-co-president Pick taking over for Gorman, who had had been at the helm for 14 years.

Brian McDonald is head of Morgan Stanley at Work; Jeremy France is head of Graystone Consulting.