Human resources is the next battleground for Wall Street wealth advisers as Morgan Stanley and Goldman jockey over new turf (GS, MS)

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Wealth management firms are pitching corporate HR departments to provide financial wellness offerings to employees, hoping they can manage the wealth of employees as they grow older.
The deal Morgan Stanley announced on Monday tries to tackle this trend, while competitor Goldman Sachs created a financial wellness offering last year and signed up Google as a client.
The pitch won’t be easy, analysts say, as it can be difficult to cross sell employees or keep the relationship when staff leave for other companies.

When it comes to prospecting for new customers, Wall Street’s wealth managers are turning to unfamiliar terrain: corporate HR departments.

That’s part of the rationale for Morgan Stanley’s $900 million purchase of Solium Capital, according to CFO Jonathan Pruzan. The firm manages corporate stock plans in what Pruzan called the "workplace solution" industry and it gives Morgan Stanley an entree into corporate HR departments. From there, it can sell more holistic financial planning tools, including its wealth management platform, he said on Tuesday at an investor presentation in Miami.

"Employers today, not only do they want state-of-the-art technology when it comes to their stock plan administration, but they also want to offer their employees financial education, wellness and tools and advice around investing and savings," Pruzan said. "We think it’s a growing space."

The funny thing is, Morgan Stanley isn’t the first Wall Street firm to notice the opportunity. Goldman Sachs last year took the collective knowledge housed in Ayco, a 40-year old financial planning outfit serving C-suite executives, and distilled it into a technology platform that can be offered to every employee, regardless of rank or wealth status, Larry Restieri, the partner who runs the business said in an interview last year.

In the past, both banks focused their marketing efforts on senior executives, in part because those clients had more money to manage and in part because the banks didn’t have the digital capabilities to profitably serve lower-level employees. Goldman’s build out began to address that need, while Morgan Stanley believes it now has that offering in its Access Investing digital platform. The latter is also planning more technology too.

"We’re going to try to generate what we’re calling the Morgan Stanley wealth portal," Pruzan said. "What we’ll be able to do is provide corporates or employers with sort of a comprehensive suite of products. So you’ll have a stock plan business, you’ll have 401(k), financial wellness education, our goals-based planning technology. That will be all bundled in one web portal."

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Goldman’s offering helped it lure Google as a client, which means that Goldman will be working with everyone from the tech giant’s executive officers down to its first-year coders. While the business opportunity in the early years will be in managing the wealth of senior officers, the firm hopes that by serving more junior employees it can make an impression and put itself in the pole position to manage their wealth when they acquire it.

Morgan Stanley sees the same, according to Pruzan.

"There are obviously millions of employees and it’s where a lot of wealth is going to get created over the next couple of generations," Pruzan said. "We think that’s a very important space and this helps us attack that space."

While most wealth managers or startups must add a customer at a time, this approach offers the ability to onboard hundreds or thousands of customers with the signing of a single corporate agreement.

Morgan Stanley will add Solium’s 1 million employees with its purchase, and also give it a much more sophisticated solution for the 1.5 million additional employees already served by its in-house stock-plan administrator. As Goldman headed into year-end 2018, it was hoping to have its offering at companies with a combined 1 million employees.

Pruzan said one way Morgan Stanley will ensure success is by capitalizing on a Solium institutional sales force that sells direct to the corporations.

The prospect won’t be without difficulty. As anyone who works in an office can attest, it’s not always easy for human resources departments to get in front of their employees and it can be difficulty for employees to know the full suite of HR perks they’re entitled to. And for Morgan Stanley and its stock plan business, it can be tough to persuade employees to convert their vested shares into other assets and keep them with the plan operator or leave them there when they leave for another firm, analysts say.

"The special sauce that most of the other plan administrators can’t do is deliver great wealth management advice," said Glenn Schorr, an analyst at Evercore ISI. "There isn’t execution risk from a perspective of something getting messed up, it’s just hard to do."

Getting it right will be an imperative, Pruzan said.

"This is critical," he said. "It’s really going to allow us to get into what we think is an important phase which is, again, the employees of all of these employers."

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Source: Business Insider