Morgan Stanley unveils family office unit, looking to serve richest of the rich

on Apr10
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Jed Finn, Chief Operating Officer for Morgan Stanley Wealth Management and Head of Corporate and Institutional Solutions

Source: Morgan Stanley

After making inroads managing money for the merely wealthy, Morgan Stanley is setting its sights on the richest of the rich — family offices with tens of billions of dollars in assets, CNBC has learned.

The bank has spent the last four years developing a suite of products geared toward family offices, the increasingly powerful investment entities set up by the world’s richest individuals and families, according to wealth management Chief Operating Officer Jed Finn.

The move is the latest sign of the arrival of the family office as a key player blurring Wall Street’s old distinctions. The firms have exploded in number in the past decade, and in their global search for yield, family offices have morphed into go-anywhere vehicles that can make wagers like hedge funds, invest in start-ups like venture capital firms and even purchase companies outright.

But their size and complexity has meant that family offices have been mostly ignored until recently, being too large for banks’ traditional wealth management channels and too small for institutional coverage, Finn said in an interview.

“They’ve fallen between the cracks of what had existed before,” he said. “It’s a $5.5+ trillion segment where nobody has significant share because there’s no single offering that really can fit the various needs of the different families.”

The push comes as Morgan Stanley, run by CEO James Gorman since 2010, aims to reach $10 trillion in client assets, more than 50% higher than the current level. Gorman has helped shape Morgan Stanley into a wealth management giant, in part through acquisitions that helped the bank target a broad spectrum of clients. The strategy has been applauded by investors, who prefer more stable sources of revenue over relatively volatile trading and investment banking.

‘Game changer’

The bank’s success in growing assets under management has led executives to seek other areas of opportunity. In 2018, Finn began asking family office clients what their biggest needs were. Managers still lean on Excel spreadsheets to keep track of holdings, manually updating figures from reams of data sources that quickly become outdated, he said.

“What they really needed was that source of truth,” Finn said. “How do you build a general ledger for a family where they can understand at any given point what their total exposure is and allow different people, different entitlements to see it? That was the challenge.”

So the bank took its fund services platform for hedge funds, which custodies and tracks values across asset classes and geographies, and adapted it for the family office, creating a clean interface showing holdings and performance.

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

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

New money vs. old

Andy Saperstein, Co-President of Morgan Stanley

Source: Morgan Stanley

The bank is continuing to add capabilities to its family office dashboard, including the ability to custody private company shares. Morgan Stanley is also working on a matchmaking platform where start-ups can raise funds directly with the bank, tapping capital from family offices and other ultra-high net worth clients.

“That has become a huge source of demand from these families. They want to be shown more and different types of non-correlated investments,” Finn said.

Although U.S. and European bank rivals, including JPMorgan Chase and UBS, have been jockeying to serve family offices in recent years, Morgan Stanley believes it has a significant head start in creating a fintech-powered solution for the group, according to co-President Andy Saperstein.

“It would be very difficult for most competitors to try and create something like this,” Saperstein said. “We’re effectively providing families institutional-quality services.”

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