Morgan Stanley Doubles Down in Japan for MUFG’s Wealth Push

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(Bloomberg) — Morgan Stanley is doubling down on its efforts to help Mitsubishi UFJ Financial Group Inc. replicate the U.S. lender’s highly successful wealth management business in Japan, where competition to serve rich clients is intensifying.

© Photographer: Kiyoshi Ota/Bloomberg Pedestrians wearing protective masks walk near a branch of MUFG Bank Ltd., a unit of Mitsubishi UFJ Financial Group Inc. (MUFG), in Tokyo.

The New York-based lender has dispatched Darren Spencer, the former chief operating officer of Morgan Stanley Private Wealth Management, to Tokyo to train staff and develop expertise at Japan’s largest lender. The two banks set up the Mitsubishi UFJ Morgan Stanley Securities Co. joint venture in 2010, which offers retail clients investment services.

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At the end of December, the joint venture managed 40.7 trillion yen ($373 billion) of client assets, about a third of the amount held by Nomura Holdings Inc.’s retail segment. Morgan Stanley’s wealth business manages about $4 trillion of assets globally and employees about 16,000 financial advisers in the U.S.

“My mission is to impart that know-how, expertise so they can get the same successes here in Japan that we have seen in our wealth management business in the U.S.,” Spencer, Morgan Stanley’s head of Wealth Management Alliance, said in an interview. He will also help to create a digital platform for wealth management services, similar to the one the bank operates in the U.S.

© Photographer: Kiyoshi Ota/Bloomberg Pedestrians wearing protective masks walk near a branch of MUFG Bank Ltd., a unit of Mitsubishi UFJ Financial Group Inc. (MUFG), in Tokyo.

Banks from Sumitomo Mitsui Financial Group Inc. to Goldman Sachs Group Inc. are stepping up efforts to manage more money for the wealthy in Japan where households hold more than half of their 1.95 quadrillion yen of assets in cash and deposits, according to Bank of Japan data.

Tapping Expertise

“We will aggressively incorporate Morgan Stanley’s world-class expertise, from advisory models to product development to market and risk analysis,” Naoyuki Hamada, Mitsubishi UFJ Morgan Stanley Securities deputy president, said in an interview last year. Hamada, a former BlackRock Inc. manager, has been working to unify wealth advisers, managers and consultants working at different divisions into a team of 1,600 bankers serving the rich.

Spencer, who relocated in November and has worked at Morgan Stanley since 2009, will also help MUFG to move away from a “commission-based, product-push type of culture” that charges clients for each trade, to “more advice-based” services that take a fixed-rate fee for overseeing broad portfolios over the long term, he said.

Japanese brokerages have been under pressure to increase income from such wealth business as competition pushes commissions lower and regulators crack down on pushy sales tactics.

While the evolution will likely take time, that is “ultimately where the U.S. business and others have gotten to,” said Spencer, Morgan Stanley’s first Tokyo-stationed wealth management specialist. “I think the future here in Japan is very bright.”

The U.S. lender also operates another joint venture in Japan, which focuses on services such as international stock offerings and bond issuance. MUFG bought a $9 billion stake in the Wall Street firm in 2008 and is its biggest shareholder.

(Updates with comment from Mitsubishi UFJ Morgan Stanley’s deputy president in sixth paragraph)

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