New Morgan Stanley CEO Ted Pick sees growth despite 'unusual' economy

By Steve Gelsi

Pick eyes opportunities in wealth management and employee stock ownership

Morgan Stanley Chief Executive Ted Pick said the firm continues to navigate an "unusual" environment of higher interest rates and geopolitical uncertainty with an opportunity to grow the firm's core wealth and investment-banking units despite a challenging economy.

"We're in an unusual place," Pick said Monday at the Morgan Stanley U.S. Financials, Payments and CRE Conference, about six months after he was promoted to the job upon the retirement of James Gorman.

Morgan Stanley's (MS) Pick said he sees "the end of financial repression and the end of the end of history" as the two major themes of our times.

The end of financial repression refers to the 15 years following the Global Financial Crisis, which featured low interest rates and near-zero inflation, and ended with a rapid hike in rates starting about 2 1/2 years ago.

"I don't know where we're going to be in a rate cycle," Pick said. "They're going to take it slow."

Pick's "end of the end of history" comment referred to the 1992 book by Francis Yoshihiro Fukuyama that declared a victory for liberal democracy after the fall of the Berlin Wall in 1989.

He disagreed with the premise of the book, however, and said the time from the end of World War II to the fall of the Berlin Wall was the exception, not the long-term trend, as at least two wars continue in Ukraine and Gaza.

"The end of financial repression and the end of the end of history have enormous implications for whether companies need to slow burn de-globalization or get on with it," Pick said.

Morgan Stanley sees growth ahead for its employee wealth and company stock-management products used by about half the market cap weighting of the S&P 500.

The firm's workspace platform currently encompasses about $500 billion in vested assets and $500 billion in unvested assets.

Once employees sell stock, the proceeds often go into an online brokerage account at ETrade, which Morgan Stanley acquired under Gorman in 2020.

Managing these transactions also fosters opportunities for Morgan Stanley financial advisers to help company client employees manage their money, he said.

It also provides an opening for investment bankers to work with companies to raise capital and launch other transactions.

Pick said "there's more to do" to increase Morgan Stanley's roughly 16% penetration of U.S. households, compared to 20%-plus penetration by most of the bank's top competitors.

The firm will do this by increasing its lending activities to wealthy customers and other clients as their deposits increase.

"Over time, I think it'll grow," Pick said. "But we're not in too much of a rush, because the cycle isn't necessarily deposit-gathering right now, but it will be, when rates at some point come to a comfortable level."

Pick said he's not planning any major changes at the bank after it acquired ETrade, Smith Barney and Eaton Vance and built out its wealth-management platform under Gorman.

Pick started as chief executive of Morgan Stanley in January, after he formerly ran the bank's capital markets business.

Two other internal contenders for the job, Andy Saperstein and Dan Simkowitz, have remained at the firm as co-presidents.

Morgan Stanley is due to report its second-quarter results on July 16.

Morgan Stanley's stock has risen 3.4% in 2024, compared to a 12.4% gain by the S&P 500 SPX.

Also read: Morgan Stanley's James Gorman stepping down as executive chair by year-end

-Steve Gelsi

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06-11-24 0852ET

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