Morgan Stanley CEO Talks About the Hardest Part of E-Trade's Integration

The integration of E-Trade into Morgan Stanley is "going very well" overall, but the one component that is "most complicated" is the workplace solutions businesses of the two companies, according to James Gorman, Morgan Stanley CEO.

That is because there are three platforms being combined, he told the online Morgan Stanley U.S. Financials, Payments & CRE Conference on Monday. Morgan Stanley was already integrating its operations with those of Solium Capital, the stock-plan administrator it acquired in 2019, ahead of its acquisition of E-Trade that was finalized in October, he noted.

"The last thing we want to do is create a bad client experience for those on one platform or the other," he explained. "So we're going to be very careful in the integration of that."

Other than that, the Morgan Stanley/E-Trade integration is going smoothly, according to Gorman, who pointed to his company's announcement last week that it shifted several E-Trade senior executives to its wealth management leadership team.

Meanwhile, it's still "early days," he said, for Morgan Stanley's integration with Eaton Vance, which his company also acquired last year.

So far, "Eaton Vance has performed better than our models predicted going into the deal," as has E-Trade, he pointed out.

Earlier in the day during the conference, Andy Saperstein, Morgan Stanley co-president, said: "We now have the ability to source new client relationships through the workplace and through E-Trade's self-directed platform. We can not only reach out to the end client directly, but this also provides a much more effective way to reach younger clients earlier in the wealth accumulation phase of their lives."

In addition, "what E-Trade brings to the table is clear," Saperstein said, noting his company has added more than 5.5 million new self-directed customers to its platform through the acquisition.

Back-to-the-Office Update

Gorman said he expected that most of the firm's U.S. employees would return to their offices by the fall.

However, "my view is a more nuanced communication is necessary," he said. Not every country is through the height of the pandemic yet, he noted — for example, India-based workers will not be coming back to offices in 2021.

There is also a difference between talking to employees at the firm's Times Square office in New York City and those at a small office in Topeka, Kansas, he said.

"I don't think making a blanket statement to all employees is helpful," he told viewers. But he added: "Make no mistake about it. We do our work inside Morgan Stanley offices, and that's where we teach, that's where our interns learn, that's how we develop people."

The company has been using a hybrid approach, gradually increasing the number of days in which many employees work in their offices at the firm.

"Our position here is that we want people to be vaccinated," Gorman also said, noting that "well over 90% of our employees who are in the offices are now vaccinated." He predicted that will increase to 98%-99%, but knows that some employees may decline to be vaccinated for personal health or religious reasons that the firm will address when needed, he said.

The firm will offer "some flexibility" for employees who face certain hardships, Gorman said. However, "that doesn't mean, 'Hey, it's Monday, Wednesday, Friday, and, you know, I'm in Florida,'" he said. "If you want to get paid New York rates, you work in New York. None of this, 'I'm in Colorado and work in New York and getting paid like I'm sitting in New York City.' Sorry, that doesn't work."

Although he does not want to be "dictatorial" about exactly when employees return to the office full time, he said: "I'll be very disappointed if people haven't found their way into the office" by the Labor Day holiday "and then we'll have a different kind of conversation."

After all, "if you can go into a restaurant in New York City," he said, "you can come into the office, and we want you in the office."

Pictured: James Gorman, CEO of Morgan Stanley (Photo: Bloomberg)