Fresh signs Morgan Stanley will enter the robo-advisory space

Speculation over Morgan Stanley's entry to the robo-advisory market has re-emerged as Greg Fleming steps down as head of the firm's wealth management division and Jim Rosenthal, CEO of the bank, takes responsibility for the impending digital offering. Rosenthal was formerly head of technology and operations at the firm. Morgan Stanley has still not announced any details, however, the bank's management is understood to have circulated a memo to employees stating "digital technology and its potential for our business is one of the most important strategic opportunities we face." It is not clear whether Morgan Stanley plans to target the mass affluent like Charles Schwab and Vanguard or develop tools for advisors who work with its extensive high-net-worth client base. Other firms including Bank of America, Wells Fargo, Legal and General and Fidelity are also working on digital platforms. 

 

As Morgan Stanley’s head of wealth management, Greg Fleming, steps down, Jim Rosenthal, chief operating officer, is stepping up to take the reins of the firm’s impending digital offering.

Though Morgan Stanley is staying tight-lipped on the details of the platform, it was stated in a memo circulating to employees that it would be for advisers and their clients. In October, Mr. Fleming had hinted that such a platform would provide easier onboarding with an aim to attract younger clients.

“Digital technology and its potential for our business is one of the most important strategic opportunities we face,” chief executive James Gorman and newly named president Colm Kelleher wrote in the memo, which was posted on AdvisorHub.

What’s more important than that ambiguous statement, however, is the fact that the firm is putting Mr. Rosenthal in charge. Prior to rising up the ranks as chief operating officer of Morgan Stanley Smith Barney in 2009, Mr. Rosenthal was head of technology and operations at Morgan Stanley. The memo stated he currently oversees technology firm-wide.

In 2015, let’s effectively mobilize FAs & their clients to ensure valuable advice for 40M households, Jim Rosenthal @MorganStanley #SIFMA — Gary Liu (@garycliu) November 10, 2014

“His appointment shows the importance of digital strategy despite the fact they are first and foremost a financial firm,” said Alois Pirker, an analyst with Aite Group. “His focus on the digital side shows how serious they take that side.”

Morgan Stanley spokesman James Wiggins said the firm has made technological advancements, including mobile apps for Apple and Android devices that allow clients to get into their accounts, make deposits and move money. Technology for advisers is constantly being updated too, he said.

Still, Mr. Wiggins declined to comment on the digital offering Mr. Rosenthal is heading.

If it is a robo, Mr. Pirker said, Morgan Stanley has two options for such a platform: to go for the mass affluent, like fellow financial firms Charles Schwab & Co. and Vanguard have done with their robos, Schwab Intelligent Portfolios and Vanguard Personal Advisor Services, respectively; or, because of Morgan Stanley’s background with high-net-worth clients, to simply offer a tool for advisers to work with such clients.

Michael Wong, an equity analyst from Morningstar who covers Morgan Stanley, says the firm is positioned well, just like Schwab and Vanguard were when they first launched their robos. There is an inherent customer base at asset management firms.

“Morgan Stanley has those components,” Mr. Wong said. “If they were to make a digital offering, there is a handful of people to make possible a viable business model.”

Other firms, including Bank of America Merrill Lynch, LPL and Wells Fargo, are also currently working on digital platforms. Mr. Wong said some firms may be slow to adopt to this technology because of internal channel conflicts.

“Any kind of wealth management firm introducing other offerings could potentially siphon assets off,” he said, adding that those assets would still stay within the firm.