By Kenneth Corbin

Morgan Stanley is no stranger to the alternative investment space, but CEO Ted Pick wants more. In an appearance at a Morgan Stanley conference on Tuesday, Pick noted that the firm is "by far the leading distributor in alts, and sometimes we've been more than the others combined."

But measured by the share of clients' portfolios held in alternative investments, Morgan Stanley isn't leading, Pick acknowledged.

Of the $6 trillion in total assets across the wealth business, $4.7 trillion are held in accounts managed by financial advisors, according to Pick. Alternative investments such as private credit or private equity are only weighted at 5%, which, by any mainstream allocation model, is underweight.

"We can debate in this moment when liquidity's getting repriced whether the right level is 10% or the traditionally modeled 15% number -- maybe it's 10, maybe it's 15, maybe it's more, but it's somewhere in that range for alts weighting for ultrahigh-net-worth," Pick said. "That means that today we are structurally underweight in the system of $250 billion to $500 billion in alts."

Expanding alts access. But the packaging and availability of those investments continue to evolve, and the current regulatory environment could be a boon to novel offerings in the space. The Securities and Exchange Commission, which under new leadership has already signaled that it is more open to expanding access to alts, is currently reviewing a product Morgan Stanley developed that Pick described as a "fund of funds" in the alts space that would be available to accredited investors and offer access to a diversified pool of investments overseen by managers handpicked by Morgan.

In that regard, Morgan Stanley is attempting to stake out its own position in the fast-moving race to offer access to more types of alternative investments and, potentially, broaden the range of investors for whom those products are available. "It's just something that's going to continue to build," Pick said.

The funnel works. Morgan Stanley describes its wealth business as a funnel, with the self-directed E*Trade business at the top, moving down to its workplace unit that helps manage employee stock-ownership and benefit plans, and then still further down to the 15,000 financial advisors serving affluent clients.

Morgan Stanley's $6 trillion wealth management business position is substantial by any measure, the product of intense recent growth within the company. In 2018, the business served 2.5 million households, Pick said. "Today we're in 20 [million households]. Two-and-a-half to 20, so it's a whole new ballgame in seven years."

Client acquisition remains a central priority for the business, but Pick also talked about Morgan Stanley's efforts to move money down its wealth funnel from the workplace unit to its financial advisors. Morgan Stanley helps handle stock plans for more than half the companies in the S&P 500, Pick said. Ideally, if those companies flourish, plan participants will see their personal wealth grow and eventually get to a point where they might sign on with a financial advisor. "Not all assets are meant to go there, but that is the golden chalice," Pick said.

Over the past five years, Morgan Stanley has seen $300 billion move from the workplace business to an advisor account. Last quarter alone, that figure was $20 billion.

"We call that reinvestment, and when times are good that reinvestment is running at 10% per annum," Pick said. "It's not just the assets outside the funnel coming in, it's the velocity of the assets inside the funnel working their way towards the financial advisor when it's appropriate."

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

June 10, 2025 14:19 ET (18:19 GMT)

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