Morgan Stanley, a Wall Street trading firm and brokerage lacking a single bank branch, is making a push to grab $50 billion in deposits held at rivals.
The firm plans to unveil a digital cash-management offering for brokerage clients in July that includes free banking with unlimited automated teller machine rebates, identity-theft protection and access to 24-hour call centers. Clients with more than $1 million invested with Morgan Stanley can also get the $450 annual fee waived for their American Express Platinum credit card.
The effort is part of Chief Executive Officer James Gorman's post-financial crisis transformation of the investment bank to rely more on retail businesses. The new funds, along with $149 billion in deposits the firm had at the end of 2015, are needed to fuel loan growth to wealth-management clients and help Morgan Stanley achieve profitability goals disclosed in January. The brokerage accounted for 43% of the firm's revenue last year.
“We don't have a lot of clients who do their everyday financial management here,” said Tom Duffy, head of bank services for Morgan Stanley wealth management. By giving them “an incentive to move their everyday to Morgan Stanley and bring more bank deposits with it, we think we can get to that $50 billion.”
Morgan Stanley clients hold $400 billion to $600 billion in deposits at banks including JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co., Mr. Duffy said. He acknowledged that getting investors to add another primary banking relationship is difficult, which is why deposits are so valuable. The no-fee Platinum card could be an enticement, said Greg McBride, chief analyst at Bankrate.com.
“That card is appealing to higher-income clientele, especially those who travel a lot, because you get credited for airline fees and a bunch of other perks,” Mr. McBride said.
Maintaining $1 million in assets and liabilities isn't the only hurdle that clients must clear to get the free card. They also must maintain a minimum direct deposit or cash balance and use some of the bank's payment systems.
Morgan Stanley's offer comes amid fierce competition in the credit-card industry, in which lenders have spent years burnishing rewards programs and services to win affluent customers. Some firms, trying to erode AmEx's longstanding dominance with those clients, have waived annual fees on their high-end cards in the first year. Now, Morgan Stanley's deposit hunt is giving its customers a lasting way to eliminate those costs.
To be sure, not all lenders publicly post terms for elite cards, enrolling certain clients by private invitation. And at least some banks have offered to waive fees for big depositors on premiere in-house cards, which can generate additional revenue from interest in the future.
Besides Premier Cash Management, Morgan Stanley plans to offer certificates of deposits and an FDIC-insured savings product. The firm, which became a bank holding company at the height of the 2008 financial crisis, will update its online and mobile banking services to complement the new products, and eventually offer the ability to make peer-to-peer payments, Mr. Duffy said.
