Bloomberg News

Morgan Stanley Creates Middle-Market Fixed-Income Sales Group

November 16, 2012

Morgan Stanley (MS:US) created a fixed- income sales group to focus on middle-market clients as it transfers some investment bank customers to its wealth- management division.

The group will consist of 50 to 75 salespeople, Eric Benedict, head of capital markets for Morgan Stanley Wealth Management, said yesterday in an interview. It will be run by Tom Driscoll, who will report to Benedict, and serve more than 1,500 middle-market clients, about 1,000 of which will be transferred from the firm’s fixed-income division in its investment bank, according to an internal memo.

“It’s freeing up salespeople to cover these accounts better,” Benedict said. “We’re putting this platform on the wealth-management side of the business, where we think we can better cover these clients, and with that, there are revenue benefits to both.”

Chief Executive Officer James Gorman is relying more on the wealth-management business as he aims to buy the rest of a brokerage joint venture from Citigroup Inc. (C:US) Gorman has identified collaboration with the New York-based firm’s investment bank as one of the five ways Morgan Stanley’s wealth- management division will reach its goal of a 15 percent pretax margin by the middle of next year.

The margin was 13 percent in the third quarter, excluding one-time charges, the highest since the joint venture was formed in 2009. Gorman had previously expected the margin to hit 15 percent by the end of 2010.

Joint Brokerage

In September, Morgan Stanley increased its stake in the brokerage joint venture to 65 percent and changed the name from Morgan Stanley Smith Barney to Morgan Stanley Wealth Management. The firm also agreed with Citigroup on a price for the remaining 35 percent, which Morgan Stanley will purchase by June 2015.

Andy Saperstein, who became head of the investment products and services division within wealth management in June, brought Benedict over from Morgan Stanley’s equity capital markets unit in September to help build more connections with the investment bank. Last month, the bank announced a structured-products group that was a joint effort from the institutional and wealth- management divisions.

The fixed-income division, run by Ken deRegt and overseen by Colm Kelleher, will share revenue from the new middle-market unit with wealth management, which is overseen by Greg Fleming, Saperstein said in an interview. The middle-market group will serve wealthy individuals in addition to small and midsize companies, he said.

The firm has had a middle-market equities sales group, run by Trey Thomas, for about three years, Benedict said.

‘Perfect Parallel’

“This is the perfect parallel to the system we have for equities, which is working extremely well,” Saperstein said. “We’re segmenting clients, pooling resources and sharing the revenue.”

The move will allow the fixed-income unit “to deepen its relationships with and grow the wallet share of the largest institutional clients by concentrating the amount of resources dedicated to this objective,” according to the memo, which was sent by Saperstein, Michael Heaney, global head of credit, and Rob Rooney, head of fixed income for Europe, the Middle East and Africa.

Gorman announced in July that the firm would shrink assets within its fixed-income division in order to improve returns as the bank faces new capital requirements.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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Companies Mentioned

  • MS
    (Morgan Stanley)
    • $35.21 USD
    • 0.20
    • 0.57%
  • C
    (Citigroup Inc)
    • $52.31 USD
    • -0.07
    • -0.13%
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