Morgan Stanley's broad new pipeline for clients

With major and recent acquisitions in the rearview mirror, Morgan Stanley & Co. has multiplied its potential pool of wealth management clients by at least four times.

Some in the broad wealth management industry wonder if financial advisers at wirehouses like Morgan Stanley ever get their hands on a fresh group of clients in the wake of a large acquisition or building a new platform for investors who don't have the wealth, typically at least $500,000, to work with a wirehouse adviser.

Regardless, Morgan Stanley is clearly pleased with its pool of fresh clients. Morgan Stanley said in February 2020 that it was buying ETrade Financial Corp. for $13 billion in stock. A year earlier, it said it was buying Solium Capital Inc.'s stock plan business for $900 million.

Those two deals, as well as other recent acquisitions, have deepened the pool for wealth management clients at the firm, with the company saying it now has more than 14 million net relationships as compared to 3 million previously, according to an investor presentation on Tuesday.

"So, the ability for us to provide services for a much larger customer base is important," said Jonathan Pruzan, the firm's chief operating officer. "And that 14 million [of client] relationships have $8 trillion of assets held away."

"We manage about $4.5 trillion in our wealth business, and so even before getting one incremental customer, if we can get any share of that $8 trillion, that would be a huge home run," said Pruzan, who was speaking at the Barclays' Annual Global Financial Services Conference. "So, this is a funnel."

Both the ETrade and Eaton Vance Corp., which was also announced in 2020, deals "are exceeding expectations driven by underlying fundamental growth of those businesses," wrote Jason Goldberg, U.S. large-cap bank equity analyst at Barclays, in a note to investors late Tuesday.

Morgan Stanley "sees the self-directed channel as an important part of filling out the wealth management service models," Goldberg wrote. "It also has great scale in the workplace and is focused on making the investments it needs to capture opportunities in the future."