Morgan Stanley MS has promoted Andy Saperstein to co-president of the firm, serving alongside Ted Pick in a move that sets the pair up to be first in line to succeed current CEO James Gorman and serves as a bellwether for the increasing importance of wealth management to the New York-based financial services giant.
In the new role, Saperstein will oversee the firms widespread wealth management business from the financial advisors working with wealthy clients to the recently acquired online brokerage E-Trade that offer commission free market access.
“I said when we announced our first quarter earnings that Morgan Stanley has reached an inflection point and is unambiguously in a growth phase,” Gorman said in an internal memo obtained by Forbes. “We recently made two significant acquisitions – E-Trade and Eaton Vance – that position us for continued growth in the coming years.”
Saperstein has moved up through the firm since joining in 2006 as chief operating officer of national sales and became head of U.S. wealth management following the Smith Barney acquisition in 2009. He would go on to serve as co-chief operating officer of the institutional securities group and co-head of wealth management before taking on the role he is being promoted from, managing director and head of Morgan Stanley wealth management.
Prior to joining the wirehouse, Saperstein held several leadership roles at Merrill Lynch and was a partner in the financial institutions group of McKinsey & Company.
“The management appointments announced today reflect the next generation of leadership at Morgan Stanley,” Gorman said in a press release issued by the firm. However, Bloomberg reported that Gorman told the board of directors that he plans to be in his position at least three more years.
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In 2009, when Gorman was serving as co-president of Morgan Stanley, the role he just promoted Saperstein to, he led the acquisition of Smith Barney from Citigroup shortly before becoming CEO. The firm also recently expanded its presence in the workplace wealth space with the purchase of Solium in 2019.
Wealth management has become an increasingly important line of business for Morgan Stanley, as well as many competitors on Wall Street.
Citigroup announced a new wealth management strategy earlier this year, Bank of America has built out a robust business with Merrill Lynch and U.S. Trust and Goldman Sachs acquired mega-RIA United Capital in 2019 and rebranded it to Goldman Sachs Personal Financial Management last year.
The ascendant wealth management landscape has attracted private equity investment to the independent RIA space in droves and given the business line increasing importance at the large brokerages. At Morgan Stanley, wealth management has become an ever larger part of the bottom line. In 2019, wealth and investment management made up 51% of the firm’s pretax profit compared with 26% in 2010.
“Wealth management has become an integral part of the Morgan Stanley story. It adds stability to the revenue stream,” says Barclays managing director Jason Goldberg, who covers the firm as an analyst. “Wealth management is an attractive segment, it’s constantly growing, a recurring revenue stream and not as capital intensive as other investment banking businesses, offering the ability for higher returns. It’s becoming a scale business and there are only a few big players, Morgan Stanley is certainly one of them.”
In the first quarter of 2021, more than a third of the firms $15 billion of net revenues came from wealth management, which brought in nearly $6 billion.
“It’s like Willie Sutton used to say: ‘Why do you rob banks, because that’s where the money is,’” Goldberg adds. “So why do you bank with people, because that’s where the money is.”
The unprecedented events of 2020 only served to strengthen wealth management as a bedrock business for the major firms as asset-based fees stayed steady while markets experienced volatility and investments were marred in uncertainty. In the first quarter of 2020, more than 40% of net revenues at Morgan Stanley came from wealth management, which brought in more than $4 billion.
The memo from Gorman laid out several other changes in executive leadership. Pick, who was promoted alongside Saperstein, previously served as Head of the institutional securities group at Morgan Stanley. Daniel Simkowitz will work alongside Pick as co-head of firm strategy and execution while continuing to lead the investment management division.
CFO Jonathan Pruzan will become chief operating officer and be succeeded by Sharon Yeshaya who will also serve as head of finance after previously being head of investor relations.
Shelley O’Connor will serve as vice chairman and head of external affairs after serving as head of banks, a position that will be filled by Michael Pizzi, who was the head of E-Trade prior to its acquisition.
Yeshaya and wealth management chief operating officer Jed Finn will join the firm’s operating committee.