Gorman Defends Morgan Stanley’s Wealth Business as Unassailable
Morgan Stanley’s wealth management division is sitting in an almost unassailable position, despite dramatic changes in the way financial advisors interact with customers and the tools that financial technology offers to upstarts trying to make inroads in the business, the company’s chairman and chief executive said Wednesday.
“We’re very dominant in wealth management,” James Gorman said at a breakfast event sponsored by The Wall Street Journal that was webcast live. “That’s the ultimate scale business.”
Gorman, who made a bigger bet on retail brokerage than any of his large competitors when he initiated the purchase of Smith Barney in 2009, said that the more than $2 trillion of wealthy customer assets kept with the firm, along with Morgan Stanley’s global trading chops, shape his vision of dominating the competitive landscape despite all the difficulties of running a very large financial institution.
The former McKinsey consultant who also ran Merrill Lynch’s wealth business prior to joining Morgan Stanley in 2016, made no excuses for the team-based, advisory model the company has been imposing on its workforce of almost 16,000 brokers.
“I would be surprised if the number of solo practitioners [in wealth] is more than 20% today,” he said, noting that the immense choice of financial products and forces affecting their performance are just “too complex” for any one person to understand.
Brokers have moved from being order-takers to salespeople introducing individual investors to equities to advisors who need to help people cope with a new and still-evolving world of individual retirement accounts, 401(k) plans and corporate stock plans, he said.
Although Morgan Stanley has been harnessing artificial intelligence and automation to make its business operations and advisors’ practice management behavior more efficient, changes that such technology are affecting in financial services are not as interesting as in other sectors of the economy, he said.
The automobile sector, retailing and delivery of goods and services in general are going through much more dramatic changes that may profoundly affect the social fabric than are delivery of financial advice, he said.
While Gorman flaunted the strength of Morgan Stanley’s wealth business, which generated $4.2 billion of revenue and $1.1 billion of pretax income in the second quarter, he castigated a questioner’s insinuation that the company might be ready to deep-six its asset management business. Though the business is “very atomized” and only about 30th in the world in size, “it’s our highest return business,” Gorman said.
Asked for his views on bitcoin and other crypto-currencies that JP Morgan CEO Jamie Dimon recently assailed as , Gorman said he has not personally invested in the highly speculative asset class but does not consider it “something inherently bad.”