Emphasis on Value-Add Services in Morgan Stanley’s Solium Acquisition

Morgan Stanley executives say the recent acquisition and rebranding of Solium Capital reflects the firm’s goals of connecting with wealth management clients earlier in their careers and in more holistic ways.

On May 1, Morgan Stanley announced it had formally completed the acquisition of Solium Capital Inc, a global provider of software-as-a-service supporting equity plan administration, financial reporting and compliance.

With this acquisition, Morgan Stanley has brought onboard a popular stock plan administration platform and will be actively combining new capabilities in this area with its private wealth management and investment banking businesses. Apart from the inherent potential growth in the stock plan administration segment, another main stated goal is to allow the firm to connect with potential wealth management clients earlier in their savings lifecycles and in more holistic ways. Firm leadership says this is necessary to continue to grow margins and ensure the firm remains competitive in a rapidly changing workplace investing landscape.

In a  conversation with PLANADVISER, Jed Finn, head of corporate and institutional solutions, and Brian McDonald, head of Morgan Stanley at Work and digital solutions, said clients have responded well to this news and are eager to take advantage of a more holistic service model. They described multiple cross-selling motivations for pursuing this acquisition, and noted the seeds of the move were planted several years ago, when Morgan Stanley first started partnering with the independent Solium Capital.

Finn and McDonald said Solium’s clients frequently expressed interest in utilizing Morgan Stanley’s retirement and wealth solutions, which suggested to firm leadership that combining the organizations could deliver great cross-selling potential. Indeed, according to Finn and McDonald, there has already been a significant level of interest in new offerings from corporations and institutions working with Solium, and as a result, Morgan Stanley is winning competitive new mandates at an accelerated pace.

Notably, as part of the acquisition, the Solium organization is being rebranded “Shareworks by Morgan Stanley.” Shareworks will become part of the new “Morgan Stanley at Work suite of financial solutions,” which will also include retirement and financial wellness. Finn and McDonald said Morgan Stanley at Work will combine planning and risk management software, Morgan Stanley intellectual capital and financial education delivered through multiple channels to enable employees to build a holistic plan to achieve their financial goals.

The closing of this transaction represents an important milestone in Morgan Stanley’s workplace strategy, they emphasized. They said that there is a new way of thinking about potential clients that is taking hold in the advisory/brokerage industry, one which is moving away from the idea that the best time to connect with potential clients is at the time that money is in motion. In reality, Finn and McDonald argued, waiting until the money is in motion (for example in a 401(k) to individual retirement account rollover) is far too late to effectively capture a potential client’s attention, let alone their assets. Instead, it is far more effective to be present in that client’s financial life far ahead of the point of the rollover decision. This is one of the core reasons why Morgan Stanley at Work is being expanded to include stock plan services. Stock plans are one of the ways that younger employees start to build significant wealth over time.

“Issuer-employers are looking for both flawless execution in the administration of their stock plan and value-added financial education and digital tools to help their employees with saving and investing,” Finn said. “Morgan Stanley at Work can deliver against both of those needs, with a comprehensive suite of services.”

On a combined basis, Shareworks by Morgan Stanley already services more than 3,300 stock plan clients with 2.5 million participants, including Instacart, Levi Strauss, Shopify and Stripe and a range of fast growing private companies, as well as newly public companies and a quarter of the Fortune 500. Finn and McDonald said access to the combined participant base through the Shareworks software is expected to enhance Morgan Stanley’s client acquisition efforts in a manner that complements its financial adviser channel, which still constitutes the core of Morgan Stanley’s growth strategy.

“As plan participants build their wealth, and their needs become more complex, there is a natural transition to an adviser-based relationship,” McDonald said. “Younger plan participants in the earlier stages of their careers can elect to be served by the Morgan Stanley Access Investing and Morgan Stanley Virtual adviser channels.”

Finn and McDonald agreed that this M&A news reflects the broader industry trend that is seeing retirement plan advisory services and wealth management services come closer together. They also noted how Morgan Stanley’s acquisition prevents the firm’s competitors from accessing Solium’s technology, which they said is among the best available, while giving Morgan Stanley advisers access to the future affluent customers already working with Solium. As younger employees on the Solium/Shareworks platform grow their wealth, Morgan Stanley could offer additional services these clients, such as managing their assets or winning mandates to take successful startups public.