Morgan Stanley in equities change, focus on wealth

Steve Harker (right) and Ian Chambers (centre) of Morgan Stanley, pictured with Danny Dreyfus, president of the Stockbrokers Association of Australia in 2015. Picture: Britta Campion

Morgan Stanley wants to ramp up its Australian wealth management presence and capitalise on what the firm labels a “flight to quality,” as most big local banks grapple with scandals and retreat from the industry.

The Australian on Tuesday revealed changes at the helm of its institutional equities business, allowing Morgan Stanley to double down on growing its wealth operations.

Morgan Stanley confirmed Ian Chambers would remain head of wealth management but would relinquish his other role leading institutional equities to focus on the wealth arm.

Will McKenzie becomes head of institutional equities. He is a 20-year stalwart at Morgan Stanley, most recently as cash equities boss.

The changes are part of a plan to scale up in wealth as the local industry endures unprecedented change, partly driven by a string of advice scandals and the resulting Hayne royal commission.

“Next year we’ll grow our adviser headcount by 10 to 15 per cent,” Morgan Stanley Australia chief Richard Wagner told The Australian in an interview. “There is a flight to quality underway in the Australian wealth management industry… our high net worth wealth assets in Australia have grown by 39 per cent in the last two years, with the number of client accounts growing 22 per cent.”

But Morgan Stanley has had to restructure the wealth business over the past eight years following the turnover of several leaders – including now Commonwealth Bank boss Matt Comyn. Mr Chambers took over in 2014 to steady the ship and the wealth unit is now breaking even.

“Our ambition is to become Australia’s pre-eminent wealth manager, delivering a genuine global capability,” Mr Chambers said.

“We would observe global financial markets are late cycle; requiring caution. Wealth management business models will get tested during tougher times. We will continue to grow. “

Morgan Stanley’s plans come as several of the major domestic banks retreat from wealth management, following the exit of investment banks UBS, Goldman Sachs, Citigroup and Deutsche Bank, which have also pulled out of the Australian wealth market.

Credit Suisse has a longstanding private banking operation in Australia.

Despite pulling back from wealth management, National Australia Bank is retaining a footprint through stockbroking unit JBWere. Westpac has committed to wealth but has left open the prospect of divesting its financial planning arm.

Macquarie Group has downsized its wealth division by merging it with its private bank.

“We have continued to focus on conduct; removal of conflicts and adherence to regulation,” Mr Chambers said of the external environment.

Mr Wagner said Morgan Stanley’s approach was not about “pushing product”, with advisers taking a research-based approach.

“More than 90 per cent of our client assets are sitting in third-party funds and third-party products,” he said.

But despite that Mr Wagner added that Morgan Stanley wouldn’t be following Macquarie down the path of removing adviser commissions, as the shared pay model reflected a similar structure used by the firm in the US.

Macquarie is moving to a salary and bonus model rather than a commission split with advisers. Globally, Morgan Stanley has 16,000 financial advisers managing $US2.4 trillion for its customers. Australian James Gorman runs the company and has instilled more focus on wealth management. Locally, Morgan Stanley has 110 advisers which manage $27 billion.