Human resources is the next battleground for Wall Street wealth advisers as Morgan Stanley and Goldman jockey over new turf (GS, MS)

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  • Wealth management firms are pitching corporate HR departments
    to provide financial wellness offerings to employees, hoping they
    can manage the wealth of employees as they grow older. 
  • The deal Morgan Stanley announced on Monday tries to tackle
    this trend, while competitor Goldman Sachs created a financial
    wellness offering last year and signed up Google as a
    client. 
  • The pitch won’t be easy, analysts say, as it can be difficult
    to cross sell employees or keep the relationship when staff leave
    for other companies. 

When it comes to prospecting for new customers, Wall Street’s
wealth managers are turning to unfamiliar terrain: corporate HR
departments. 

That’s part of the
rationale for Morgan Stanley’s $900 million purchase of Solium
Capital
, according to CFO Jonathan Pruzan. The firm manages
corporate stock plans in what Pruzan called the “workplace
solution” industry and it gives Morgan Stanley an entree into
corporate HR departments. From there, it can sell more holistic
financial planning tools, including its wealth management platform,
he said on Tuesday at an investor presentation in Miami.

“Employers today, not only do they want state-of-the-art
technology when it comes to their stock plan administration, but
they also want to offer their employees financial education,
wellness and tools and advice around investing and savings,” Pruzan
said. “We think it’s a growing space.”

The funny thing is, Morgan Stanley isn’t the first Wall Street
firm to notice the opportunity. Goldman Sachs last year
took the collective knowledge housed in Ayco, a 40-year old
financial planning outfit
serving C-suite executives, and
distilled it into a technology platform that can be offered to
every employee, regardless of rank or wealth status, Larry
Restieri, the partner who runs the business said in an interview
last year.

Read more:
A Goldman Sachs unit hidden in an office park in Albany, New York
holds clues to the future of wealth management

In the past, both banks focused their marketing efforts on
senior executives, in part because those clients had more money to
manage and in part because the banks didn’t have the digital
capabilities to profitably serve lower-level employees. Goldman’s
build out began to address that need, while Morgan Stanley believes
it now has that offering in its Access Investing digital platform.
The latter is also planning more technology too. 

“We’re going to try to generate what we’re calling the Morgan
Stanley wealth portal,” Pruzan said. “What we’ll be able to do is
provide corporates or employers with sort of a comprehensive suite
of products. So you’ll have a stock plan business, you’ll have
401(k), financial wellness education, our goals-based planning
technology. That will be all bundled in one web portal.”


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Goldman’s offering helped it lure Google as a client,
which
means that Goldman will be working with everyone from the tech
giant’s executive officers down to its first-year coders. While the
business opportunity in the early years will be in managing the
wealth of senior officers, the firm hopes that by serving more
junior employees it can make an impression and put itself in the
pole position to manage their wealth when they acquire it. 

Morgan Stanley sees the same, according to Pruzan. 

“There are obviously millions of employees and it’s where a lot
of wealth is going to get created over the next couple
of generations,” Pruzan said. “We think that’s a very important
space and this helps us attack that space.”

While most wealth managers or startups must add a customer at a
time, this approach offers the ability to onboard hundreds or
thousands of customers with the signing of a single corporate
agreement. 

Morgan Stanley will add Solium’s 1 million employees with its
purchase, and also give it a much more sophisticated solution for
the 1.5 million additional employees already served by its in-house
stock-plan administrator. As Goldman headed into year-end 2018, it
was hoping to have its offering at companies with a combined 1
million employees.

Pruzan said one way Morgan Stanley will ensure success is by
capitalizing on a Solium institutional sales force that sells
direct to the corporations. 

The prospect won’t be without difficulty. As anyone who works in
an office can attest, it’s not always easy for human resources
departments to get in front of their employees and it can be
difficulty for employees to know the full suite of HR perks they’re
entitled to. And for Morgan Stanley and its stock plan business, it
can be tough to persuade employees to convert their vested shares
into other assets and keep them with the plan operator or leave
them there when they leave for another firm, analysts say.

See also:
Morgan Stanley just made its biggest bet since the financial crisis
in a bid to win the hearts and minds of unicorn startup
employees

“The special sauce that most of the other plan administrators
can’t do is deliver great wealth management advice,” said Glenn
Schorr, an analyst at Evercore ISI. “There isn’t execution risk
from a perspective of something getting messed up, it’s just hard
to do.”

Getting it right will be an imperative, Pruzan said.

“This is critical,” he said. “It’s really going to allow us to
get into what we think is an important phase which is, again, the
employees of all of these employers.” 


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Human resources is the next battleground for Wall Street wealth advisers as Morgan Stanley and Goldman jockey over new turf (GS, MS)