Steve Garmhausen and Cheryl Winokur Munk
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Photograph by Erik Drost
With its just-announced, $900-million acquisition of employee-stock-plan manager Solium Capital,
envisions a pipeline to millennials who figure to control significant wealth in the coming years.
“The strategic goal was to do a better job developing relationships with younger people during the period where they’re accumulating wealth,” Andy Saperstein, co-head of wealth management at Morgan Stanley, tells Barron’s Advisor. “We didn’t have a good, scalable way of serving them. Now we can reach and develop relationships with all the employees, regardless of what stage of wealth they’re in.”
One goal is the creation of relationships, early in their wealth-accumulation years, with young grinders in startup firms who are paid partly in stock.
“Over time, the idea is to become the one- stop shop for employees,” Saperstein says. “There will be a Morgan Stanley workplace portal with their 401(k), stock plan, a goals-based plan for overall workplace wealth, et cetera.”
In addition to the potential growth it offers for Morgan Stanley’s wealth arm, which manages $2.3 trillion for 3.5 American households, the deal also solidifies the firm’s presence in stock-plan business. Solium’s 3,000 corporate clients cover 1 million workers and include companies such as Shopify and Stripe.
Morgan Stanley’s existing stock-plan business has more than 300 corporate clients and covers 1.5 million employees. But it is generally geared toward top executives and Fortune 500 companies. The acquisition, which is Morgan Stanley’s largest since the financial crisis, offers the wealth management giant broader access to the start-up market and makes it a leading player in the space overall.
Don’t be surprised if Morgan Stanley does follow-up acquisitions, says Jed Finn, chief operating officer for the wealth management business: “We see a potential pipeline where we can add to these services.”
Morgan Stanley’s advisors will be keen to secure new relationships through the firm’s stock-plan business, of course. An internal certification program will be used to help decide which get referrals, Finn says.
“There are a set of capabilities we insist on our advisors having because we’ve seen them work,” he tells Barron’s Advisor. “They need to be planning-based, to advise both sides of the balance sheet, and to have demonstrated the ability to attract, retain and grow clients. Layer on top of this, for advisors who are interested in receiving leads, being experts on the company’s stock plan.”
“We’ll run that process for the benefit of advisors, and more importantly, for prospects and clients,” says Finn.
The Solium deal’s benefits should extend beyond the wealth management business, Finn adds.
“They’re [Solium] the largest private platform provider, so [they have] access to a lot of pre-IPO startups way before they go public. And in the context of an end-to-end corporate service offering, you start on the institutional side with capital markets services –IPOs or lending—then the employer side–running the stock plan or 401k—then individual wealth,” he says. “Then there’s the OCIO [outsourced chief investment officer] offering in Morgan Stanley Investment Management.”
Morgan Stanley said the deal is expected to close in the second quarter of 2019.