Morgan Stanley adding 401(k) participant services to boost wealth business

The brokerage added to its financial wellness platform, and is considering product offerings for 529 plans, deferred compensation and HSAs

Sep 12, 2019 @ 2:21 pm

By Greg Iacurci

Morgan Stanley Wealth Management is adding more services for 401(k) participants and other workplace clientele as part of a plan to leverage its workplace access to grow its wealth business.

The wirehouse brokerage, which has roughly 15,600 financial advisers, announced Thursday a slew of additions to its financial wellness platform, including one-on-one coaching, student loan refinancing and assessments used to gauge employees' financial health.

These new capabilities come as the firm is considering new workplace product offerings around deferred compensation, health savings accounts and payroll-deferred 529 plans, as it seeks to build out more services for participants and become a sort of one-stop shop for their financial lives.

"This is part of our growth strategy in wealth management and something we'll be focused on going forward," said Brian McDonald, the head of Morgan Stanley at Work. "We want to go where wealth is being created, which we believe is in the workplace."

"We serve 2.7 million participants. Those individuals, if done right, will become life-long Morgan Stanley wealth management clients."

Morgan Stanley's strategy isn't unique in the retirement-plan market. Registered investment advisers, broker-dealers and retirement-plan record keepers have been building out participant services like financial wellness as a way to generate different revenue streams from a captive audience and distribution outlet: employees.

Some retirement-plan lawsuits have begun scrutinizing how some firms seek to monetize participants. Attorneys have stipulated in some recent settlements than plan record keepers can't use participant information to then cross-sell nonretirement-plan-related services like insurance to those employees.

"It's directionally where everyone's going," said Fred Barstein, founder and chief executive of The Retirement Advisor University. "Providers have access to all these participants, and it's easier to get them than find new clients off the street. But they're different types of clients, where they have to use technology to scale it. They're not the $500,000-plus accounts."

Americans have had to accept greater responsibility to manage their financial lives, amid increasing longevity and a broad shift toward defined-contribution plans and health savings accounts.

Financial wellness programs aim to help employees address everyday financial needs, with education and advice around topics such as budgeting, debt and savings.

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Morgan Stanley's platform additions include third-party partnerships with two companies: Credible, which offers student-loan refinancing options to participants, and My Secure Advantage, which offers phone-based one-on-one financial consultations with employees.

The wirehouse also added new digital capabilities, such as an assessment that gauges areas in which employees need more financial help and delivers educational content based on those topics. Employers can also gauge financial health across their employee base, which allows Morgan Stanley financial advisers to deliver group seminars around specific areas of need.

The additions come a few months after Morgan Stanley closed on its acquisition of Solium Capital Inc., which allowed the wirehouse to bundle wealth management offerings into Solium's administration platform. Their combined workplace administration platform reaches 3,000 private and public U.S. companies. The financial wellness services are also available to workplace clients using Morgan Stanley's stock plan administration platform.

"It is the true convergence on the one hand of technology, wealth management, and the need for participants in defined-contribution plans to go deeper than just 401(k) asset allocation," Mr. Barstein said of financial wellness.

Some skeptics of financial wellness wonder how effective the programs really are, and say it is challenging to measure success. And as the move to offer more participant services continues, some advisers are skeptical of the ability of traditional 401(k) advisers to be expert in all areas of an employee's financial life.

"At what point are you a jack of all trades?" asked Ellen Lander, principal and founder of Renaissance Benefit Advisors Group.


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