The $6 Trillion Strategy: How Morgan Stanley Is Reshaping Wealth Management with Jed Finn

Jack Sharry: Hello everyone and welcome. Thank you for joining us for this week’s very special edition of WealthTech on Deck. The feedback I hear from leaders I speak with each day on our WealthTech on Deck podcast and across the industry is highly consistent. You enjoy hearing from the best and brightest in our industry, especially as we dig into and try to understand a particular firm’s strategy. You especially enjoy hearing from others on how they’re dealing with the trends we all see and are trying to gain a competitive advantage around. Leaders also tell me how they enjoy hearing about the history and the context. We often talk about how trends emerge and grow and get refined over time. We’re gonna get into all this in a moment with an executive who in my mind is the clear leader along with his executive team colleagues in developing and refining their strategy and ultimately making things happen around wealth management and its future. Our guest today is Jed Finn. Jed is the head of wealth management at Morgan Stanley. I’ve had substantive conversations with at least 80 industry executives over the first half of this year. The metric that matters most to the senior execs I speak to is net new assets and Morgan Stanley is the clear leader in net new asset growth today. We’re gonna go back in time, talk about how things have unfolded over time for Jed and the Morgan Stanley team and how things are going now. We’ll also talk about Jed’s perspective on where he sees the industry headed and the role he foresees for Morgan Stanley. Jed, welcome to WealthTech on Deck. Great to have you here.

Jed Finn: Thanks for having me, Jack, and I appreciate the kind introduction.

Jack Sharry: Easy peasy. So I’ve been following Morgan Stanley for a long time. As I may have mentioned to you way back when I was a member of the Dean Witter team in the 1980s. I’ve watched the strategy emerge and evolve since then and there’s a lot of rich history. For today’s discussion, I’d like to pick up the story in 2018. I remember reading an article in Barron’s, Andy Saperstein was quoted about Morgan Stanley’s growth strategy at the time, I think it was just emerging or at least getting clearer, at least going to the public with it. At that time, Andy was head of wealth management. He said in the article that Morgan Stanley held half the wealth share of your clients and your growth strategy was to earn the right to the other half. To me, that was a turning point in what your strategy became. So please fill us in the role you played way back when and how you and Andy and the team at Morgan Stanley shaped the strategy to achieve the industry leading results you’ve accomplished over time.

Jed Finn: Sure, thanks. So I know you started at 2018, but I’m going to take us back to 2010 and I’ll be brief about it. But I think it’s an important place to start because at that time, the view of a number of the folks involves leadership of the firm, and I wasn’t at Morgan Stanley yet, though they were a client on the consulting side was that wealth management is a scale business and you need to have scale to be able to keep up with all of the demands in terms of resources, whether it’s changes in regulation, technology changes, product proliferation, changing preferences of clients and advisors. And that all has a pretty significant cost to it, as well as obviously continuing to help clients achieve their goals. And so phase one of our evolution was really getting scale. And that was the Morgan Stanley Smith Barney combination, which I would say happened over the course of 2010 to 2015. It was the largest wealth management integration at its time. It still is the largest wealth management integration. And we learned a lot and admittedly didn’t do everything right during that period. And we made some platform decisions and some technology decisions that we probably would have liked to go back and do again. But we got to call it full integration, everybody on the same platform, everything up and running by late 2014, early 2015. And then we had this great scaled business, but the question was, to your point, how are we going to make sure that we are the quarterback for the entirety of the client’s relationship? And we did estimate that at the time we had about half of clients assets here, half held away. And what we said to ourselves was, well, we could double the size of the firm without adding a single new client relationship. How do we do that? Through building out a number of technology solutions and capabilities to tilt the table such that clients were incentivized to hold all of their assets here. And I don’t necessarily mean monetarily, although there is some upside to that, but I mean, they will get better advice if we can see the entirety of the portfolio and make sure there are not correlations that exist across different counterparties. And so we implemented a lot of tools to facilitate that. We implemented asset aggregation. We implemented Aladdin’s risk management capability, which is still the only large scale wealth management implementation of it, which allows us to stress every bit of the portfolio in real time. We implemented a number of new planning tools. We implemented a number of advisor and client communication tools like Next Best Action that has been talked about in the past. And over the course of call it 2016 to 2019ish, a year past when you started that article, we did consolidate clients’ wallets. We estimated, and these estimates aren’t perfect, obviously, because it relies on IXI information or what clients tell us that they’re holding with us, but we think we pushed that up from call it 50% of clients’ wallets to 60% of client wallets. But of course, as you know, in wealth management, averages lie, and that 60% was probably 100% of a subset of clients and a very small relationship with a number of clients. And so we continued on that consolidation journey. But at the same time, there was a question being asked by investors and analysts and the board of, where does that next leg of growth come from? And so starting in around 2019, as you might’ve seen, we went through a capability building phase. And that was the phase of buying Solium on the workplace side, buying E-Trade on the self-directed side, and of course our partners on MSIM, Morgan Stanley Investment Management acquired Eaton Vance. The goal was really through those different sets of acquisitions to be able to meet clients where they are and grow with them over time because our hypothesis was the standard argument in the industry of wait for money in motion, that had been eclipsed because people were making decisions earlier than that. And if you wait till money is in motion, it’s too late. If you want the entrepreneur who’s going to monetize, post an IPO, well, it turns out they’ve already done series A, B, C, D, and through those monetization events, they’ve already got a financial advisor. Or if you’re waiting for a corporate executive to roll over the 401k into an IRA, A, that tends to be a small portion of their overall wealth, but B, for the last 20, 30, 40 years, someone else has been giving them advice. And so it’s a harder fight. And so our view is we want to get there earlier, build relationships with clients and grow with them over time. And so over the course of, call it 2019 to let’s say the end of last year, we have been in integration mode where we’ve been building out a common data infrastructure and making sure everybody’s on the same system and making sure that we have the tools to track clients through the funnel that we always talk about. So you start as a corporate executive in a stock plan or in a retirement account or maybe you’re a self-directed investor at E-Trade and we want to give you an experience with Morgan Stanley that builds trust and confidence so that when you’re ready to consume an advice relationship, we make an introduction to a financial advisor. And so if you go back to 2019, we had two and a half million clients and about 2.5 trillion in assets and we were bumping up against 60% share. So we said, we can still grow with our existing footprint. Fast forward today and we’ve got 20 million clients because of the capabilities that we bought and the capabilities that we have built. And we have six trillion assets. But if you look at the wealth of those clients held away, because a number of those relationships are still more superficial because we’re administrating their stock plan or they’re a participant in a 401k or perhaps they’re an E-Trade self-directed investor. The assets held away are significantly more than that. We think we’ve got 13 or 14 trillion assets held away. So even though we’ve gone from two and a half trillion to six trillion, we still think we could triple the size of the firm now without adding a single new client relationship. And we’re continuing to do the work to introduce those clients to financial advisors when they’re ready for advice.

Jack Sharry: That’s great. Gonna move forward to the next phase. Of course, James Gorman announced his retirement in May of 23. As one would expect, things start to shift and move around. You went from COO of Wealth Management and a couple of things to become head of Wealth Management. So, what was next for you as you took on the reins and continued to pursue this net new sales growth strategy? Tell us about, as you sat the chair and what you’ve been up to over the past couple of years.

Jed Finn: Sure, so as we were very careful to describe to anyone who would listen and even people who didn’t want to listen, the strategy wasn’t changing. Wealth management is a huge part of Morgan Stanley overall. And that’s one of our competitive advantages. We’re 50%, roughly, of the firm. If you look at our major bank wealth management peers, they range from 5% to 20% and change depending on how you’re counting, which is really important because how wealth management goes is how Morgan Stanley goes. And so when we’re thinking about deploying resources as a firm level, wealth management and our advisors and our clients are beneficiaries of that relative importance. And so it’s allowed us to be able to invest in a way that others have a hard time replicating. And that strategy of continued investment through cycle, despite what’s happening in the environment has continued. And so to be more specific about it, as I mentioned, we were focused on integrating the different channels and making sure the experiences, different clients build relationships through us over time is seamless and connected and that continues apace. But as we look out over the next year, two years, there’s been a lot of external changes and we’re in the process of responding to and driving those changes. And there’s three specific trends that we as a leadership team have been focused on. The first I would describe as the institutionalization of wealth management, meaning the bar for what constitutes high quality, high sophisticated advice has only gone up. We have a number of our clients who, even though they’re two legged individuals, they have assets that make them look more like walking institutions and you have to be able to deliver a white glove sophisticated experience to them. And so that means investing in a family office platform where we can provide the middle office services for those families, whether it’s running complicated reporting, whether it’s doing bill pay, whether it’s conducting due diligence on investment ideas that they bring us. We took that business from zero families and zero assets in 2020 to over 75 families and over 200 billion in assets today. And it is an incredibly long sales cycle because these are big, complicated operations to migrate over. But once they’re here, the ability to continue to deliver value for them over time is significant would be an example. Another example is building out our private markets trading capability and ensuring that we can source differentiated flow for our clients. Through the Solium acquisition, one of the things people don’t realize is we have one of the largest cap table management capabilities in the industry. There’s two main providers of cap table management. And when I’m saying cap table management, I mean, when private companies start to grow, they need a software solution that measures and tracks who owns what shares at what prices with what voting rights. And it becomes more complicated as they grow. The two main players are Shareworks Private, which is what we own, and Carta, which focuses more on smaller mid-market companies. And we just signed a partnership agreement with them to kind co-cover a number of clients. And the reason why that’s important is we’ve got now 10 out of the top 10 unicorns as clients on our cap table management software capability. And so when they’re looking to raise money, we can make that experience incredibly easy for them by putting an entry on their cap table and then offering it to our retail clients according to the prices and the terms of whatever the tender or liquidity event is. And so we can start to offer differentiated flow to our clients who are expecting access to unique investment opportunities back to that theme of institutionalization of wealth management. There’s a number of other things we could talk to, but let me quickly touch on the other ones and then we can take this wherever you want to go. The second theme we’re focused on really is around globalization. And if you look at both what’s happening in the world today, one of our research team’s key themes is a multipolar world. There’s questions about what happens to the US dollar. We’ve seen the way that European and global markets are trading relative to US markets. Clients want access and they want access in multi-currency and they want to be able to move dollars around to different jurisdictions based on what’s happening to the revenge tax or the regulatory regime or tariffs in general. And we as the largest wealth management firm in the world need to be able to facilitate that. And so there’s a lot of effort right now to be able to meet our clients again, tilting towards the sophisticated side to be able to meet their asset location needs and to meet their product access needs. And then the third theme isn’t going to surprise anybody. And that’s really about AI and how AI is disrupting so many different parts of our business. We were early in our partnership with OpenAI, so we’re the only financial services firm that has a direct relationship with them, which was critical because they helped us build out a significant component of our infrastructure. But we think about AI across three dimensions. The firm, which is, you know, streamlining operations straight through processing, making the advisor, client, client service associate experience as efficient as possible. Then there’s the advisors, a second horizon and helping giving them access to tools that enable them to be more efficient in serving clients, understanding what the investment requirements of trust documents are without having a person involved, being able to record calls like everybody’s doing today. So that would be a second horizon. And then the third horizon is tools directly for clients. One of the things that we’ve seen clients ask for the most is to be able to understand what folks who look like them are doing and being able to see that in real time, obviously anonymized, but be able to give them a guide as to what people in their similar wealth, similar life situations, similar concerns, how they think about managing their business. And we can build a real community around the sophistication and the four walls of Morgan Stanley. So those are some of the areas we’re spending time on right now.

Jack Sharry: So thank you for that look at today and also tomorrow. A lot of those themes will play out, I’m sure, I know, over time. Just a personal note, I’ve spoken about, I have a chance to talk to so many around the industry and clearly my view, Morgan Stanley is in the lead. And hence why I decided to move my assets to Morgan Stanley, a lot of it because of the tools that you have to offer. So it gets back to the business of execution. It’s one thing to have the strategy that you’ve laid out so articulately, but then it’s also about the execution. And for my money, it looks to me like not only are you well positioned today with all the tools you have, I’m intimately familiar, but also where you intend to go. So talk a little bit about how you, given all that you just said, given the size of the organization, I think you’re up to… I think Morgan Stanley has like 75,000 people. How do you execute? How do you make it real? How do you get all those dots connected? A lot of dots there that you just described. How do you make it happen?

Jed Finn: Yeah, it’s a great question. And it gets more and more complicated given all the things that are happening in the environment around us. But I would say there are a couple of pillars of our execution, which have helped us be successful. Number one, the team has been together for a long time. So we, the people who are sitting in their various seats were also here during the MS SB integration years, maybe different seats, but we saw what it was like. And the reason why that’s important is those are very challenging times as anyone who was here knows, we had advisor attrition, we had problems with technology, we had problem serving clients, and it was a real slog every single day to get through it. And everybody who sees the success that we’ve had thus far, was here at the time to feel what it was like when things weren’t successful. And so no one takes the position that we’re in for granted. There is zero complacency in the leadership team, on through the organization, out in the field and with advisors. And everybody realizes that we’re in a privileged position and we have to go out and do the work to re-earn that privileged position each and every day. And so that’s one dynamic that is unique. The second is really how critical our financial advisors are in shaping the direction of where we’re going. So we do not come in from on high and sit in a conference room and say like, this is what we think clients want. 100% of the decisions that we’ve made from getting into the workplace business to building out the AI the way that we have, to investing in the planning tools, to building family office, to sourcing private markets, to getting bigger in the cap table. I mean, I could go through 25 different things. They all came from our financial advisors. We’re smart enough to know that if we listen to the best practitioners in the industry tell us what they need to serve their clients most effectively and just deliver it to them, good things are going to happen. So it’s not that complicated of a formula, to be honest. It’s, listen to people who know what they’re doing and then execute behind it. That would be number two. And then I think number three, we are in a unique position, like I said earlier, in the context of our relationship with the rest of the firm. One of Ted Pick, who’s our new CEO’s big focus area is delivering the integrated firm. And when you’ve got not just a, 35, 40,000 people in wealth, but the other 40ish thousand people across the globe and across industries thinking about how they can also bring unique capabilities to Morgan Stanley Wealth Management clients, because it’s the edge of the wedge in a lot of cases, then, again, we’re able to execute and deliver unique opportunities. And so when we say to a wealth management… an important wealth management client who may need help just thinking through an IPO of their private company or more support for what they’re getting from a corporate perspective, and we call up one of our partners on the investment banking side or in the sales and trading side, we can bring those resources to those clients immediately. And there’s a real focus on making sure that the different parts of Morgan Stanley fit together, not as an investment bank, a sales and trading organization, an asset management firm, and a wealth management firm, but as a premier advice business. The thing that all of our businesses have in common is we provide advice to clients. You can’t say the same thing about any of our peers. We’re not in payments. We’re not a commercial bank. We’re not a global transaction processor. We are an advice firm and there’s a real rallying around that general high level mission and that helps on the execution as well.

Jack Sharry: Wow. I follow you guys closely, as I think you know, and I figured I had a pretty good handle on it but I just I’ve learned a bunch in this conversation, so thank you for that.

Jed Finn: We should do it more often.

Jack Sharry: As I see stuff, I will make sure you know, because you’re just doing smart stuff. I love talking to people in our industry about what they’re doing, how they’re doing it, but pardon the sucking up, but you guys really do it right, you in particular. So thank you for that.

Jed Finn: Appreciate that.

Jack Sharry: One last thing before we go, always my favorite question we ask on the podcast. I don’t think I’ve ever asked you anything close to this, but here it goes. Let’s see how you do. So what do you do outside of work that people would find interesting and surprising that you’re particularly passionate about or excited about? What do when you’re not thinking up strategy and making sure it happens?

Jed Finn: There is no time that I spend outside of work. I’m just kidding. I’m sure this is an answer that you get a lot, but in this case, it’s true. I have a 13-year-old son and a 15-year-old daughter, and they’re into lots of different extracurriculars. And so that is where I spend most of my time. We’re in that busy phase of life, but it’s fun to watch them do their different sports. It’s fun to watch them go through the different parts of their academic career and try to spend as much time with the family as possible.

Jack Sharry: Great. Love it. That is the common answer and it’s a good answer. So I appreciate that. So we’re going to wrap it up. I really appreciate you taking the time, Jed. For our audience, if you’ve enjoyed our podcast, please rate, review, subscribe, and share what we do here at WealthTech on Deck. We’re available wherever you get your podcasts. You should also check us out at our dedicated website, wealthtechondeck.com. All our episodes are there, along with blogs and curated content from the many folks around the industry that we have the pleasure of speaking with like Jed. Jed, thanks again. It’s been real pleasure, as always.

Jed Finn: Thank you for having me and thank you for being a client and if you ever run into anything where feedback is warranted, you know where to find me.

Jack Sharry: I will take you up on that. So thanks very much.

Jed Finn: Appreciate it, Jack.