'Hong Kong, Singapore, go hard at it': Morgan Stanley CEO shares his plan to win over wealthy Asians
- Morgan Stanley CEO James Gorman said the Wall Street bank is planning to invest in its wealth management business in "core Asia" out of offices in Hong Kong and Singapore.
- Gorman also said he doesn't see any reason why the number of Morgan Stanley financial advisers should fall below 15,000. The bank ended 2018 with 15,694 wealth representatives, according to an earnings release.
- Gorman spoke Tuesday at the firm's financial services conference, where he was interviewed by bank analyst Betsy Graseck.
Morgan Stanley, known for being a top wealth manager in the US, has begun to set its sights on business opportunities outside its home market, according to CEO James Gorman.
One particular area of focus is in Asia, where Gorman said he sees a lot of opportunity. Speaking at the firm's annual financial services conference on Tuesday, Gorman said the bank has several partnerships in Japan that it could leverage to grow in that country, but that servicing Asian clients outside Japan, from offices in China and Singapore, offers the greatest opportunity.
"The real opportunity is core Asia," Gorman said. "Most of the clients there, the ultra high-net worth, are effectively what I call walking institutions. They are people who operate like family offices, endowments, hedge funds and so on. That business is growing nicely. That's where I'd like to invest, that's the core. Hong Kong, Singapore, go hard at it."
China represents the largest opportunity for global wealth managers as the country's robust and dynamic economy is creating wealth at a staggering scale. In 2017, a new billionaire was created in China once every three days, according to according to a report from UBS and PwC. In 2006, there were just 16 Chinese billionaires, but in 2017, the tally hit 373 - one-fifth of the global total - including 106 people who became billionaires that year.
Among US and European banks, the Swiss banks Credit Suisse and UBS have been most vocal about the opportunity they see for managing wealth in Asia. Though Morgan Stanley doesn't disclose regional figures, the vast majority of its wealth management revenue is generated in the US.
Morgan Stanley already offers wealth management services from offices in Hong Kong and Singapore, not to mention maintaining a small wealth management business in Australia, Gorman's native country.
Gorman also added that he doesn't expect to go after growth in Europe, where the bank had a business it eventually sold a few years ago after it lost money in 20 of 21 years.
"I'd much rather have another 20 people in Paramus than 20 people in Munich with all the regulatory stuff," Gorman said, referring to the city in Northern New Jersey. "So we got out of that. Asia is a little different."
The bank also sees growth in the US, where it's got a leading market share, according to Gorman. The bank ended 2018 with 15,694 wealth representatives, according to a January statement. That makes it one of the largest wealth managers in the US.
"I've told the folks I will be disappointed if we saw the numbers drift below 15,000 in the near term," Gorman said. "There's no reason why the business should be shrinking. But the solution isn't to go and find FAs doing $200,000 in production, it's to find a smart young college grad to go work in a team that's doing $10 million in production."
He added: "If you look at where the assets are for the big teams, I'd much rather throw more resources at them than to put another small producer in another small town in America."
Morgan Stanley wealth chief Andy Saperstein said that as technology helps to make advisers more efficient, they'll become more and more productive. Saperstein spoke to Grasek in a separate conversation earlier Tuesday.
"It won't be long before you see teams with production of $50 million and someday even $75 million or $100 million," he said. A spokeswoman declined to disclose the current production figures for teams.
In what was a wide-ranging discussion, Gorman also said he's beginning to think of the firm's banking unit as its own profit center. In April, he named wealth management co-head Shelley O'Connor to chairman and CEO of the firm's two banks and gave her a mandate to hire people.
"We want to think of the bank now as its own profit center and invest in it for growth," he said. "I would really like the bank side to be much bigger," he said, adding that "we're stable, but we're stable around markets. I'd like us to have some stability that is not market tied, and that's really around the bank."
Gorman also said he felt like Wall Street analysts were a little too bullish on the firm's prospects for securities trading in the second quarter.
"A lot of the analyst models have us beating the first quarter," Gorman said. "I'd be very surprised if that happened."
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