Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Industry Spotlight > Mergers and Acquisitions

Morgan Stanley Targets Millions of New Customers After M&A Spree

Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Deals with E-Trade, Eaton Vance and others have grown the firm's base to 14 million relationships with $8 trillion in held-away assets.
  • The wirehouse is seeking to build trust with participants and corporate clients through its workplace offerings.
  • The overall M&A market continues to be active and will likely remain so, unless there is volatility.

One of the key benefits of Morgan Stanley’s recent acquisitions of E-Trade and Eaton Vance is they provided the wirehouse with a path to significantly expand its client relationships, according to Jonathan Pruzan, Morgan Stanley chief operating officer.

“We had roughly 3 million relationships” only a couple of years ago, and that number has now grown to “14 million-plus net relationships,” after those and other recent acquisitions were completed, he said Tuesday during the Barclays Global Financial Services conference.

“The ability for us to provide services for a much larger customer base is important,” he said, noting those 14 million relationships have $8 trillion of assets held away. “We manage about $4.5 trillion in our wealth business and, so even before getting one incremental customer, if we can get any share of that $8 trillion, that would be a huge home run,” he explained.

Morgan Stanley’s workplace strategy was also “ignited” in 2019 with the acquisition of stock-plan administrator Solium Capital, now Shareworks by Morgan Stanley, and then again with the acquisition of E-Trade, a Morgan Stanley spokeswoman told ThinkAdvisor on Monday.

“This is a funnel,” Pruzan said Tuesday, noting the company now has about 6 million participants in the workplace.

“While their wealth is growing and their stock is vesting, we’re trying to build trust and relationships with them,” he explained. “We have a privileged position because we’re already inside the company and already have access to them. And so through content and education and financial wellness, we’re trying to build relationships with this client base such that when stock vests or they need services [like] advice, we’re in sort of the pole position to be able to convert them to a client or add incremental services to what we do for them.”

Morgan Stanley, however, is “agnostic” about what service model clients choose, he said. “If they’re in the workplace and they want to be on a self-directed platform, that’s fine, or digital advice or [the] financial advisor model or even the family office model that we’re building,” he noted.

“We just want to be capturing more clients and then be able to grow with those clients and, as their needs change, be able to provide a customer experience that’s seamless between the service models and allows us to provide the services they want, when they want them and how they want them,” he explained.

Another “nice thing about this funnel” is that Morgan Stanley can add corporate relationships, he noted. For example, in the first quarter, Morgan Stanley partnered with Wilson Sonsini, a law firm that he said gave the wirehouse private capital capabilities. “Recently, we brought in an institutional consultant that manages retirement money for smaller businesses” also, he added.

Growing the number of corporate relationships and “growing the top of the funnel is going to provide future growth for us,” he said.

Integration Update

The E-Trade acquisition, meanwhile, is “going quite well from an integration standpoint,” Pruzan said. The “culture is emerging quite nicely, and the underlying business performance is quite strong” and there have been “positive upside surprises” also, he said.

Between when Morgan Stanley announced the deal in February 2020 and when it closed the deal in the fall, the “size of E-Trade, the number of clients they had, the assets that were in the workplace, invested assets and the assets in the system,” the daily asset revenue trades (DARTs), the number of deposits and the number of customers were “all dramatically higher than when we bought the company, and we’ve seen a continuation of that trend,” he said.

Morgan Stanley is also pleased with how the Eaton Vance business has performed since that acquisition closed early this year, he said.

Being able to customize products for Morgan Stanley’s wealth channel using Eaton Vance and some of its capabilities, particularly in the workplace, is “going to be a very interesting opportunity for us as we continue to integrate these models,” he added.

The M&A Landscape

The overall M&A market is “very active” and at “historical highs in terms of volumes and the pace of announcements,” Pruzan also said.

The focus recently, however, has been on M&As in the $1 billion to $10 billion range and there are “not a lot of the mega deals,” he said. “CEO confidence is high. People clearly want to do things, and we would expect that to continue.”

The “biggest potential disruption to historical M&A cycles is volatility,” he pointed out, noting, “they can withstand corrections because valuations get reset and then everyone sort of goes forward but if you have volatilities and valuations are moving dramatically from day to day, it’s very hard to get transactions done.”

He predicted that, barring volatility, we will see “continued M&A announcements … for the foreseeable future.”

(Pictured: Morgan Stanley headquarters in New York. Photo: Bloomberg)


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.