Using Technology to Strengthen Platform and Product Capabilities with Ben Huneke
Technological disruptions have revolutionized the way financial institutions serve their clients. Integrating technology into financial systems not only strengthens product, but also creates a seamless ecosystem across the wealth management spectrum.
In today’s episode, Jack talks with Ben Huneke, Managing Director and Head of the Investments Solutions Group at Morgan Stanley Wealth Management.
Ben is the senior executive in charge of all of Morgan Stanley’s retail products and platforms for their wealth management business. As the Head of the Investments Solutions Group, he is responsible for the development, marketing, and distribution of investment products. These include annuities and insurance, mutual funds, ETFs, hedge funds, private debt, equity, real estate funds, as well as individual equities, fixed income, and structured products.
Ben and Jack discuss product technology platforms, how technology is the key driver to delivering value in the advisory business, and why finding partners with specialized capabilities is the best way to grow a business.
What Ben has to say
“We believe that financial advice is valuable and is going to continue to be valuable. But we believe that technology is going to be an increasingly important part of how that advice is delivered to clients.”
Read the full transcript
Jack Sharry: Hello, and welcome to WealthTech on Deck. Thanks for joining us for this week’s podcast. As you know, we talk with industry leaders who are on the cutting edge of creating strategies, capabilities and platforms around the confluence of digital and human advice to improve investor advisor and firm financial outcomes. On our show today, we will talk with Ben Huneke. Ben is the senior executive in charge of all of Morgan Stanley’s retail products and platforms for their wealth management business through their advisory business. Ben, great to have you on the show. Welcome. Glad to have you on WealthTech on Deck.
Ben Huneke: Thanks for having me. Nice to be here.
Jack Sharry: Great. So Ben, tell us about your role at Morgan Stanley, what do you do?
Ben Huneke: So I work in wealth management, I run the group called investment solutions, which in fact is the product areas. So anything we sell with a CUSIP that goes into an account and a Morgan Stanley account, and as well as some of our advisor facing technology platforms. So that’s our 3d desktop, as well as our advisory platform itself.
Jack Sharry: Great. So I know key focus for Morgan Stanley is to connect and coordinate all the elements you oversee, as well as other parts of the firm that you may not directly oversee. But the objective is to create a unified experience for advisors and their clients. So fill us in on your strategy. We’ve got an up close and personal view of that we work closely with you all, but talk about how you’re bringing all this together. We’ll talk about where it’s going in a bit, but how are you bringing it together currently?
Ben Huneke: Yeah, man, I think that’s a really important point. I mean, part of our job is to try to integrate the experience for an advisor across the client relationship and make it as seamless as possible. We believe that the market for advice in the United States find net worth investors, it’s obviously a very attractive demographic, the asset base is slated to double over the next five to seven years. And so far, our fastest growing teams that are growing sort of 3x, the pace of our average team, they’re going to be preparing to manage not two times the amount of capital that they’re managing today, but 456 times the amount of capital. So, you know, I like to say to our teams, if you’re managing $500 billion, today, in five years, you got to be ready to manage $3 billion in capital. And so technology is going to be a big part of that. And the ability for our advisors to scale advice, practices, that size is going to be a critical component of that.
Jack Sharry: Ben, actually, if you’re aware of this, I used to work at the old Dean Witter way back when I was head of insurance and annuity sales back in the 80s. Yikes. So Morgan Stanley, a great name in our industry, but has a lot of other great names along the way. You’ve got Smith, Barney, and you’ve got Dean Witter, and you’ve got Shearson, and probably 100, other names. And then more recently, you’ve made some acquisitions along the lines of E-trade and Solium, and parametric, Eaton Vance, and so on. And what I’m describing here is a lot of really cool stuff, a lot of great product, great platform, great capability. So talk about that, because you’re overseeing a lot of what I just described. And I know that you work closely with the retirement side, and you’re working closely with the folks on the trade side. How does this all come together? where’s this going? To me? It’s a pretty grand experiment, but I think a pretty smart one, too.
Ben Huneke: So we like to say category one, because we’re able to build wealth management services to clients across a wide variety of different channels. So you know, we have the E-trade platform, which has a incredible direct to consumer trading platform. So we’re working on how do we deliver a broader set of advice and products and services through that platform? We have the biggest stock plan, administration business now. So we have relationships with 6 million participants in those stock plans. So what’s amazing is, if you thought about our business, before these acquisitions, we had a big business in the wealth management space with relationships with about 3 million people through the addition of E-trade and Solium. And the stock business, we have a relationship now with 14 million Americans. So you know, there’s $10 trillion of assets that our clients have estimated away from us. So we could literally double or triple the size of our business, just by further enhancing our relationships with our existing client base. So it’s really a very sizeable platform and our ability to deliver advice and services to those clients is what we’re focused on every day.
Jack Sharry: I remember reading I think, was in Barron’s Andy Saperstein who heads up Wealth Management at Morgan Stanley made the comment I think time you had a two and a half or 3 trillion in assets. And Andy’s comment was our focus is on getting the other half of the assets that our clients have. Now they’ve expanded the footprint to 14 trillion. Imagine that the strategy has been consistent. So talk a little bit about how that all comes together. Because you mentioned earlier that technology will be a critical factor. Certainly You’ve got the products and the capabilities and the wherewithal. But to connect and coordinate all those different businesses requires a whole lot of technology and, frankly, smart technology to make it all work. So talk a little bit about that, if you would.
Ben Huneke: I mean, yeah, as I was saying, I think, you know, the advisors are gonna have to prepare to manage much bigger pools of capital, and the client expectation is that that capital is going to be managed in a highly efficient, highly customized fashion. And so I think the ability for our advisors to use technology to enhance the ability to manage larger pools of capital, with greater levels of efficiency and customization, I think is where we’re really focused on spending our resources. And, you know, I think a lot of the tools that you mentioned, you know, advanced through parametric, and some of the other tools that he trade bring to the table will greatly enhance our ability to allow our advisor teams to deliver that level of customization at scale advice at scale. So we believe that, you know, financial advice is valuable, and it’s gonna continue to be valuable, but we believe that technology is going to be an increasingly important part of how that advice is delivered to clients. So that’s what we’re building for.
Jack Sharry: So talk a little bit about Matt Witkos is a longtime friend. And he and I’ve had many discussions on this topic, along with John Monica, who heads up sales for Eaton Vance parametric and the gang at Morgan Stanley Investment Management. I know that’s another business that you’re not directly overseeing, but certainly an important part of what you’re doing. And one of the things that I know you’re developing is a whole lot of training and support around getting advisors familiar with the product capabilities, that technology capabilities. That’s one of the biggest challenges, I assume, in fact, I don’t assume I know. Because that’s rapid across the industry is how do you get advisors to adopt all this new stuff? And how do you make it so easy, and so much in the sort of the flow of their workday? So talk a bit about how you all are trying to get the advisors to fully embrace all the technology been accumulating and coordinating over the past many years?
Ben Huneke: Well, I mean, we spend $2 billion a year in technology. So we believe that the pace of technological advancement in this industry is increasing, not decreasing. So you know, that adoption Challenge is a significant one. But we do believe that it’s, you know, incumbent on us to make it very easy for the advisors. And so one of the things we’re focused on is building capabilities directly into the desktop that make it more seamless to use some of these capabilities. So parametric is a great example where we have a lot of advisors using parametric today. But the process around using that service is pretty cumbersome, because you have to transmit a bunch of information back and forth, not just holdings, but also specific tax lot information. There’s a lot of flexibility in how they implement direct indexing in terms of what indexes and what level of customization and all of that is very manual with emails and spreadsheets. And so we’re very focused on building the those capabilities directly and seamlessly into our UI platform. So that the advisors at point of sale can take advantage of all of the capabilities that parametric bring to the table in a very seamless and easy fashion. And so that’s a big focus for us in 2022 to build that out.
Jack Sharry: So you a lot underway. I mean, I quit familiar with what’s going on at Morgan Stanley. And it’s pretty incredible what’s happening now. And I’d like you to talk a little bit about that includes not just product platform technology, all the stuff we’ve talked about. But now it also includes training and getting the advisors up to speed on all this newfangled stuff. Where does this go? They have a pretty good idea where you’re headed, but talk a little bit about that. This is obviously going to take some time. What does this look like is the end goal getting that the vaunted UMH up and running?
Ben Huneke: I’m sure Eric Laurie, with us. They’re talking about the unified manage household. So look, I I mean, on the technology adoption front, I think, you know, obviously, over the past two years, you know, just by pure necessity, technology adoption curve has been bent upwards because people have been working in this remote environment. So we’ve seen dramatic increases in the adoption of a lot of our technology tools. So before the pandemic, we had a completely digitized option for processing alternatives, paperwork, so all of the reg D filings and subscription documents, adoption of that technology, just as one example has just increased dramatically. So now over 95% of our subscriptions in alternatives are done fully digitally. So I think the outcome of what we’ve gone through over the past couple of years has seen more and more advisors be more and more willing, and more and more cognizant of the power of technology, and what it can do for them in terms of scale. And so we’ve actually seen a real thirst for training and information about how to better adopt technology in their practice. For example, we’re in the midst of running a significant educational program for advisors around all of the capabilities our platform has around tax efficient investing, when we talk about all the different elements of that, but across the platform, all the tools and all the products that we have out there that can help our advisors be more tax aware, in terms of how they’re investing capital. And for the first leg of that curriculum, we had 5000, advisors, sign up and join that program. And that’s like, for those of us who have been trying to get advisors to sign up and learn all about all this, that’s an extraordinary, voluntary signup rate for a program like that. And so, to me, it’s just an example of like, how thirsty the advisor population is for learning about how to use these technologies to further their practice.
Jack Sharry: So a couple of levers of improved outcome, one is tax, you just highlighted that, in fact, that’s the biggest impact studies show. The other is risk, you have a relationship with BlackRock, so Latin as part of your platform, talk a little bit if you would about the importance of risk and tax as part of this effort, because it’s not just about investment performance. And certainly you want to do the best you can there, but it’s really not so much what you make is what you keep. And so it’s the after tax and using appropriate risk levels in terms of achieving that. But talk a little bit about how you’re addressing the whole concept of tax efficient tax where investing across multiple accounts.
Ben Huneke: You know, I just think our clients read the paper every day, and they see and hear the drumbeat around taxes. So you know, wealthy Americans are looking at a future of higher taxes. And so in particular, around assets and how they’re taxed, they mean, that’s the focus of a lot of the proposals around tax changes. So our wealthy clients are highly attuned to and highly sensitive to the environment around tax, you see that in people moving to Florida and other lower tax districts, but you also just see a growing awareness of after tax returns. And so you know, the way we’ve architected the platform, we’ve built over time, a lot of capabilities to have advisors be more efficient in the way in which they locate assets, the products they use, and the tax components of that, as well as how they withdraw assets, we have a tool called intelligent withdrawal that we use in partnership with you all that helps us you know, locate where assets are most efficient, to pull out as our clients spend the assets that they’ve accumulated. And then we also have a lot of tools driven off of, you know, taking advantage of some of the elements of the tax code to be more efficient in the way in which you invest assets. And I think that’s going to be a recurring theme. For the next decade or two decades, as the United States sort of figures out, you know, how to redistribute wealth in this country. And so like, our wealthy clients, that’s really one of the top concerns that they have is not what their market return is, but what their after tax return is, for an advisor, beating the market is really hard. Adding tax Alpha through the use of these products and services is a lot easier. So we’ve been really focused on trying to educate our advisors on all the different ways we can add tax alpha, as we believe it’s likely easier to do that than it is to consistently add alpha in the market.
Jack Sharry: So I don’t think I’ve ever asked this question. But here goes, I’m a student of our business, I’ve been around a long time I’ve been in the asset management side of in the insurance world, I’ve been in broker dealer land, I’ve been around this business and was one of the early proponents of the whole advisory business way back when. So I’ve kind of watched the businesses evolve. And what I’m seeing now is really the key driver, in my mind is technologies, just how it all comes together. Because there’s so much going on, you really can’t do this on your own. This is not to be done, you know, with a spreadsheet, or an abacus or a calculator. I do you guys pull this off? I mean, I’m well aware. I mean, I’ve been through some of the acquisitions you’ve made with the Solium e trade, Eaton Vance, with the existing capabilities with the way you work with software companies like ours, and others, many others. How did you guys pull that off? Because you’re not only doing it from a smart strategy from where I sit, but you’re actually executing? You’re actually making this stuff? Go? I’d be pulled this off?
Ben Huneke: Look, I mean, I think one critical thing is its consistency. Right? So we’ve been at this modern well strategy for, you know, since the Smith Barney merger in 2009. And so a lot took a while to put those two platforms together. We’ve been investing towards this future for, you know, 10 years or more. So, you know, there’s a lot of advantages of scale. being nimble isn’t necessarily one of those advantages. So it takes time and patience and consistency around what the strategy is. So the great thing is, you know, we have a branch manager meeting every February, and that’s the meeting where we launched you know, what the priorities are for the year and you know, what’s been great over the past 567 years, is the meeting gets quite boring because the strategy is kind of the same, and it’s just execute So this set of deliverables, now it takes a while to roll this stuff out. But we feel really good about what we were building two or three years ago that’s now rolling out into the platform. And so, for us, it’s really a long journey. But we started 10 years ago. And so we feel really good about where we are. But we also feel really good about where we’re headed over the next 10 years, I think that as I said, the market we’re in is really attractive from a demographic perspective. And we feel really good about our positioning in that market and the resources that we’re going to have to go after it. So we just sort of put our head down and kind of knock a bunch of things out each year and kind of work towards that future. And, you know, the acquisitions we’ve made have been really additive to that with E trade Solium. And now, Eaton Vance, all of which have been really additive to what we think that the capabilities of our platform are. And you know, we’re super optimistic about the future here.
Jack Sharry: So for our listening audience who are curious about strategy, we talked about strategy each week on the show, if you think about it, each trade is direct to consumer play Solium. And also relationships with Empower, invest. Well, and I’m sure others on the retirement side. So that’s another feeder system, there’s the direct, there’s the retirement, you already have a robust and industry leading wealth management business, you’ve added additional product capabilities with enhanced parametric, I’m sure others that I’m not mentioning. But if you’re watching what Morgan Stanley is up to, I would just point out that they’re creating a system that while these are all feeders, they’re also building technology across the board that ties these different areas. So did I get that right, Ben? Did I miss it? I probably missed a few things.
Ben Huneke: But look, I think that’s exactly right. I mean, I think that a lot of the value of the technology part is the integration, right? So the capabilities and finding capable partners. And obviously, we always faced the decision of whether to build something ourselves or whether to find a partner. And in a lot of instances, we find partners who are specialists in capabilities that can do things far better than we could do individually. Like you mentioned, the Latin, which is a partnership we have with BlackRock, you know, across all of that platform, they’re $20 trillion of, of assets run through that platform, or probably out. And so they have a platform at scale around risk analytics that we could never replicate, you know, so we find partners. But then we spent a lot of our capital, integrating those capabilities into the advisor workflow into the E-trade platform into our workplace platform, so that we leverage them appropriately and make them very easy to use. And so I think that’s really for us, when we think about some of the value that our platform can add, it’s really finding Best In Breed partners that can do things really well. And then integrating those capabilities. So that you can see the 11 risk analytics on your desktop, you can use that risk analytic engine, on assets, you’ve aggregated from other places, you can use that as an example or an exhibit in your financial plan, you can show that on your Morgan Stanley online platform. So it’s taking those best in breed capabilities and partners and then trying to do our best to integrate it into a seamless ecosystem. For us, we spend a lot of our technology dollars on those integration points around sharing those capabilities across the platform, seamlessly. And that’s really, I think, what makes it easier for the advisors to adopt the technology is the fact that they have these capabilities seamlessly integrated into their workstation, and they’re not poking around and going from place to place to get them.
Jack Sharry: The other thing I observe is having grown up in this business for a very long time, I don’t notice a lot of silos, you may feel that more than I observe them. But seems like everyone’s kind of rowing in the same direction. And the different businesses are working together and relying on each other’s whoever brings in the latest technology that will make sense for the greater good. It seems like you guys have figured that out better than most that I say,
Ben Huneke: I mean, look at advantage of having a very integrated wealth management platform across a variety of different clients segments. So you know, we are sort of agnostic as to where the client wants to be serviced by Morgan Stanley, if they want a direct to consumer relationship through the Etherion platform, we do our best to try to provide as rich of experience through that platform, if they’re a workplace participant, we do our best to meet them there and try to deliver wealth management advice and services to those participants in an effort to try to build a bigger relationship with these folks. So you know, we kind of have the benefit of being able to service clients at pretty much across the entire wealth management spectrum from people who are very vanilla needs, inside e-trade to some of the most sophisticated family offices, the very, very high end of the spectrum. And we can pretty much allow the clients to self serve across that. And then it’s all one integrated p&l. So on some level, we the management team are sort of agnostic to where the client wants to access our products and services and our job. My team’s job is basically to try to provide as good a client experience across that spectrum wherever that client wants to interact with Morgan Stanley.
Jack Sharry: That’s great. It’s impressive, I have to say. So you and I bump into one another on the street five years from now, 10 years from now, what does Morgan Stanley look like down the road? You vindicated and well aware that you knock off some important projects each year and more to come probably stay at that steady rate was Morgan Stanley look like down the road, if you’re gonna look at your crystal ball?
Ben Huneke: Well, the thing that we’re focused on most is much bigger. So I think we’re preparing to run, we have four and a half trillion, I think we ought to be 10 trillion. So I think much bigger. I think the technical capabilities, that the platforms are going to be able to deliver to clients, I think, the myth of technology, as a enhancer of customization, I think, if you went back five years, people thought, technology, you know, in order to be customized, everything had to be done by hand. And I think the reality of the cases that technology actually enhances your ability to customize, it doesn’t hurt your capability to customize. So tax management, you know, the ability to do tailored planning, the ability to update those plans, the ability to be efficient, around delivering tax alpha, at the individual level, all of these capabilities are enhanced through technology not diminished. And so I think what you’ll have is clients with much more customized portfolios across a number of different dimensions. And so, for us in the advice business, like tying everything to a benchmark in the market is not ideal, right? In terms of the outcome, what a client really cares about is their ability to deliver on what they need their capital to do for them in life. And so developing a much more robust set of technology capabilities that are going to allow us to deliver those outcomes directly to clients in a very customized fashion, I think is kind of the way we’re going as an industry away from a pie chart with a bunch of benchmarks against the market return. That’s what we’re trying to build for. And I think we have a lot of the elements of it. And I think, you know, we have a lot to do between now and that five year window. But I think in five years, it’ll be really exciting what our advisors are able to deliver to their clients from a customization perspective, from a portfolio perspective, and from an investment outcome perspective at a customized level. And at scale at 2x 3x 5x. The scale they’re running capital today.
Jack Sharry: Wow. It’s impressive, I have to say, at this point, as we get close to our time that we shoot for around half an hour of the podcast, what are three key takeaways you might want to share with our audience?
Ben Huneke: Well, look, I mean, I think we talked about it in the strategy part, I mean, to us, I think the technology that’s available, and is going to be available, the pace of technological change in this industry is accelerating, not decelerating. And so, you know, while we had a adoption challenge with advisors five years ago, and continue to have that, like, it’s not slowing down, that advisors tell us enough, enough with the new technology we’re still learning with last year, and I just tell them, it’s only getting faster. So you know, it’s just like the rest of the world like this technology is getting faster, not slower. So if you’re behind, you’re going to be further behind next year than you are this year see in the world moves much faster. And technology hates inefficiency. So I think there’s technologies coming that are going to really disrupt a lot of the inefficiencies that exists in this market. And so, you know, I think the technology change is accelerating. I think the other thing, though, which is a false comparison is people look at advice, human advice and technology as sort of mortal enemies in terms of the way in which they interact in the marketplace. And we disagree with that. So we believe that human advice to wealthy clients is actually really valuable, and that clients will continue to pay for that advice. And that technology is a huge enabler of the delivery of that advice. And so we don’t look them as enemies. We look at technology as a great enabler, and a great way to continue to deliver value through advice. So obviously, with 15,000 advisors, who are all in on the value of advice, but we do believe that the market for advice is going to continue to be really healthy, and that technology isn’t hindering that it’s actually helping that. And so we want our advisors very focused on delivering advice that’s customized and tailored to the idiosyncratic nature of each individual client. So their financial planning situation, their tax situation, their family situation, these are places where the advisor can add a tremendous amount of value. And then on the market investing part, use technology to deliver that in a highly efficient, efficient manner. And then the last thing I would just sit on is taxes. Right? We talked about taxes, I think the next 10 years, 20 years, there has to be when you look at the stats around wealth inequality in this country, and the amount of assets that are moving from one generation to the next over the next 20 years. There is going to be it might not be 2022 but there There’s going to be a recalibration of tax in this country and preparing our clients to be ready for that. And to be efficient in the way in which they’re investing and efficient in the way in which they’re thinking about moving capital from one generation to the next is going to be probably the most critical challenge that advisors face. And I think it’s one of the ones that’s highest powerful for wealthy families. So we want to try to prepare our financial advisors for that coming challenge, because it might not be 2022. But the reckoning around that is coming at some point.
Jack Sharry: I agree. I would agree. So the closing session, Ben, we do each week is my favorite questions tell us something interesting or unique, you do outside of work that people may not know about you that they might find interesting?
Ben Huneke: Well, we’re very involved with the New York common pantry, which is a food pantry serving all of New York City. Obviously, the need for that set of services dramatically exploded over the past two years with changes in federal policy, as well as with all of the economic havoc that the pandemic has wreaked on the city. So my wife is former chair of that organizations were very involved there and do the New York Times crossword puzzle every day. So I think it was track of my times, but I haven’t done Friday yet. I intend to as soon as we get off this podcast.
Jack Sharry: That’s terrific. So Ben, it’s been a real pleasure speaking with you. I’ve enjoyed our conversation for our audience. If you have enjoyed our podcast, please rate review, subscribe and or share what we’re doing here on WealthTech on deck. We are available wherever you get your podcasts. Once again, Ben, thanks so much for real pleasure.
Ben Huneke: Jack, thank you for having me. Real pleasure.