What’s behind Morgan Stanley’s latest cash offering?
Morgan Stanley is launching a new way to manage cash holdings for its wealth management clients — helping to ensure banking assets won’t exit the platform and the firm can generate revenue on a greater percentage of the client’s wallet share.
CashPlus, the firm’s new brokerage account, offers access to a Morgan Stanley credit card from American Express, online bill pay, mobile check deposits, unlimited ATM fee rebates, and other features, according to the company.
The platform was rolled out to the firm’s 15,000-plus advisor workforce earlier this week and replaces the wirehouse’s Premier Cash Management program.
CashPlus is “an alternative to a bank experience,” Paul Halpern, head of deposits and banking services at Morgan Stanley, said in a statement.
There are two account types — Premier CashPlus and Platinum CashPlus — with fees $15 and $45 a month respectively. However, fees are waived if clients open and maintain an additional eligible Morgan Stanley investment account, enrollment in Morgan Stanley Online. For Premier CashPlus accounts, clients need to either have $2,500 in total monthly deposits or $25,000 in average daily bank deposit program balance. For Platinum CashPlus accounts, clients need to have both $5,000 in total monthly deposits and $25,000 in average daily bank deposit program balance.
“If they can capture the cash aspect then it will be that much easier for investment accounts to grow,” says Sophie Schmitt, senior industry analyst at the Boston-based consultancy firm the Aite Group. “Clients could actually make the Morgan Stanley account a place to deposit a paycheck and whatever is left over at the end of the month goes into the market.”
Morgan Stanley’s deeper foray into cash management comes on the heels of similar offerings from a laundry list of digital wealth managers. By partnering with chartered banks, Betterment, Wealthfront, Personal Capital, and even high-profile advisor Ron Carson, have added cash management tools with high-yield savings account options — in many cases with market-leading yields.
The new offerings have proved popular. In April, Wealthfront said it collected $1 billion in its first month after launching its cash product tool. (The robo advisor has plans to offer mortgages as well.)
“Banks are doing cash [management]. Online robos are doing it,” Schmitt says. “Morgan Stanley is coming up with a better solution then it’s had in the past.”
At Morgan Stanley’s wealth management division, executives have plans to significantly boost earnings and net new clients onboarding in the coming years. The unit recently reported net revenues for the fourth quarter of $4.6 billion compared with $4.1 billion a year ago — up 11%. Client assets topped $2.7 trillion, a 17% year-over-year increase, even as the firm reported having fewer financial advisors.
“There is clearly room to grow from here,” CEO James Gorman said during an earnings call this month, citing a goal to reach one million new wealth management relationships in the coming years. That lofty objective was put forth in an earnings presentation where the firm outlined a plan to convert hundreds of thousands of participants in its stock plan program, called Shareworks by Morgan Stanley, to wealth management clients.
Collecting client data is another reason firms are looking to expand into new financial services products. Apple, for instance, launched its credit card in March. Google said it would look to partner with Citigroup to offer checking accounts sometime this year.
The tech giants may use the accounts to collect client data and peek deeper into customers’ behavior. For wealth managers, the same tactic may be at play, says Eric Sandrib, an analyst at Aite Group.
“No doubt there is a data play,” says Sandrib. “When you have a deeper view of the client through cash management, it helps optimize all the other areas within the investment process.”
Digital innovation will play a key role in the firm’s growth, Gorman said. “On wealth management, we're making numerous investments across all of our platforms to enhance the digitalization of our firm and overall technological capabilities given our scale and other efficiencies,” he said during the call.
Ninety percent of financial advisory teams at the wirehouse are currently using its digital wealth toolkit, according to the company.