Morgan Stanley ups stake in digital race with hire from Schwab

Last October we reported that Morgan Stanley's then president of wealth management, Greg Fleming, had hinted that the bank was planning to enter the robo-advisory space. Yesterday, the firm announced that it had hired Charles Schwab's Naureen Hassan to oversee strategy and marketing of digital platforms for its financial advisers and clients. Hassan will assume the newly created role of chief digital officer of wealth management. Schwab launched its robo-advisory platform in March 2015, accumulating $5.3bn in the first nine months. Jim Rosenthal, COO of Morgan Stanley said Hassan's record of successful innovation "will sharpen our ability to compete for today's high-net-worth individuals.

Morgan Stanley may be eyeing its own robo advice platform.

During the Money Management Institute fall conference on Wednesday, Morgan Stanley Wealth Management President Gregory Fleming hinted at a future digital offering, which would foster a quicker onboarding process and attract younger clients to financial services.

“Technology is pushing in ways we’ve never seen before,” he said.

A spokesman at Morgan Stanley said the firm would not comment or elaborate further.

Mr. Fleming said robo-advisers are revolutionizing the industry, bringing a new interface to clients but not providing strong advice on the back-end. He said there is a shift toward more goals-based planning, and that advice — as well as financial advisers — will always be needed.

A digital platform, however, provides firms the ability to offer differentiated services, with a tiered fee structure. It’s a good way for clients to get started planning their finances, while also allowing advisers to capture long-term clients.

The hope for Morgan Stanley, as well as any other advisory firm that has a robo platform, is that eventually the client will need more complex planning, and migrate over to a full-service financial adviser.

More firms are starting to take robo-adviser platforms seriously. Charles Schwab & Co. launched Intelligent Portfolios, a retail robo-adviser, and Institutional Intelligent Portfolios, the adviser-facing version, in March and June, respectively. Vanguard rolled out their hybrid model Personal Advisor Services, which was in beta for two years, in May. BlackRock picked up business-to-consumer robo-adviser FutureAdvisor in August.

“It will just be the standard,” said Craig Iskowitz, chief executive of Ezra Group, a technology consulting firm in the financial advice industry.

In particular, Mr. Fleming said the robos will attract millennials, who have come to expect high-level technology services. Their first instinct, he added, is not to go to a traditional financial adviser’s office, whether their parents do or not.