Morgan Stanley unveils Family Office unit looking to serve the richest of the rich

Z Finn, Morgan Stanley Wealth Management Chief Operating Officer and Head of Corporate and Institutional Solutions

Source: Morgan Stanley

After entering into managing money just for the rich, Morgan Stanley is focusing on the richest of the rich – family offices with tens of billions of dollars in assets, CNBC has learned.

According to Zed Finn, Chief Operating Officer, Wealth Management, the bank has spent the past four years developing a product suite that focuses on family offices, powerful investment companies set up by some of the richest individuals and families in the world.

The move is the latest sign of the Family Office’s arrival as a key player in obscuring Wall Street’s old differences. Companies have exploded many over the past decade and in their global quest for returns, family offices have become vehicles that can make bets such as hedge funds, invest in startups such as venture capital firms and buy companies entirely. .

But family offices have been largely ignored until recently because of their size and complexity, which is too big for banks’ traditional wealth management channels and too small for institutional coverage, Finn said in an interview.

“They fell between the cracks of what was before,” he said. “This is a $ 5.5 + trillion segment, where no one has a significant stake, as there is no single offering that fits the different needs of different families.”

Morgan Stanley, who has been managing CEO James Gorman since 2010, aims to reach $ 10 trillion in client assets, which is 50% higher than current levels. Gorman helped shape Morgan Stanley into a wealth management giant, somewhat helping to target a wider range of bank customers through acquisitions. This strategy is appreciated by investors who prefer relatively volatile trading and more stable sources of income than investment banking.

‘Game changer’

The bank’s success in augmenting assets under management has led executives to look for other opportunities. In 2018, Finn Family Office began asking clients what their biggest needs were. Managers still tend to keep track of holdings in Excel spreadsheets, manually updating statistics from data source reams, which quickly become obsolete, he said.

“What they really wanted was a source of truth,” Finn said. “How do you build a simple ledger for a family so they can understand what their total exposure is at any given time and allow different people, different qualifications to see it? The same challenge.”

So the bank adopted its fund services platform for hedge funds, which preserves and tracks values ​​across property classes and geographical areas and adopts it for the family office, creating a clean interface that shows holdings and performance.

The Morgan Stanley Family Office unit began boarding companies on the new platform last year and has added more than $ 25 billion in assets so far, the bank said. In a strong year for equities, Morgan Stanley added a record new net worth of $ 438 billion in 2021.

“It has become a game changer for these families because now they can see where all their holdings are in real time and make decisions accordingly, which is their biggest challenge,” he said.

New Money Vs. Old

In January, when asked about his $ 10 trillion goal, Gorman cited the new family office business as one reason the bank was growing assets faster than in previous years. “The reality is, the rich get rich quicker than the less rich,” Gorman said.

As the fortunes of the super-rich increased, those with at least $ 250 million to invest were drawn to the family office model, which gave them direct control over their financial affairs in a lightly controlled vehicle.

Since offices do not have to register as advisors to the Securities and Exchange Commission, estimates for their number and assets under management vary. According to the accounting firm EY, there are at least 10,000 family offices worldwide, most of which have been created in the last 15 years.

Morgan Stanley has been more successful at signing up on the newly affluent compared to the old money families already operating on his platform. Startup entrepreneurs raising money in private rounds, selling their companies or taking them out publicly have increased unprecedented wealth production over the past decade.

“If you look at every IPO in the last 12 to 24 months, you’ll see a principal who has more money than they have now and usually has no team to manage it,” Finn said. “When it comes to the sixth generation [of wealth]The matter is already being handled. “

Andy Suprastein, co-president of Morgan Stanley

Source: Morgan Stanley

The Bank continues to add capabilities to its Family Office dashboard, including the ability to control private company shares. Morgan Stanley also works on a match-making platform where startups can raise funds directly with the bank, tapping capital from family offices and other ultra-high net worth clients.

“It has become a huge source of demand from these families. They want to show more and more unrelated investments,” Finn said.

Although US and European bank rivals, including JPMorgan Chase and UBS, have been jockeying to serve family offices in recent years, according to co-president Andy, Morgan Stanley believes it is a significant start in creating a fintech-based solution for the group. Superstain.

“For many competitors it is very difficult to try and create something like this,” Superstein said. “We effectively provide institutional-quality services to families.”

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