A land of startups, Silicon Valley abounds in businesses that pay employees not just salaries but also in company shares.
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That put it in a position to offer them services from its industry-leading wealth management division. At the center of these endeavors is Brian McDonald, the head of the firm's Morgan Stanley at Work unit, which provides a wide range of financial services to businesses and their employees.
"When the [collapse] happened, Morgan Stanley was there and sat down to help many of our existing corporate clients that were using Shareworks, and clients that were our prospects that became clients because of the need for them to kind of move on and be in a stable place to be able to support themselves," McDonald said in a recent interview.
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McDonald recently sat down with Financial Planning to discuss his firm's plans for Silicon Valley, the prospects for wealth management in that region and the general benefits of equity ownership plans.
This interview has been edited for clarity and brevity.
Financial Planning: From the wealth management perspective, is there anything with equity compensation that makes it different or makes it require special attention from advisors and managers?
Brian McDonald: More wealth is being created in the workplace than anywhere else today, and it's primarily because of the vehicles that companies are creating to attract and retain talent.
So whether it's a startup that's just getting going all the way through the late-stage companies like Stripe and Reddit, where they're using equity compensation to pay their employees but also to allow them to be owners and in what they're creating together. And then, as they go public, it's certainly a big part of the ongoing compensation as they deliver equity awards that sometimes vest annually. But, like a lot of our tech partners in the Bay Area, they're aiming at investments that happen monthly, quarterly, biannually, etc.
To answer your question a little more simply, it's such an important part of their wealth creation but can be very complex in terms of knowing when to exercise and sell, when to hold and when to sell to diversify. And then when you go to diversify, where should you think about putting your money to work? So it's a perfect companion to the best-in-class advice that our advisors provide.
These employees certainly are important to the owners and their company, and therefore the equity compensation they receive is a big part of the experience. But part of the reason that stock awards are given is so that you can utilize them to fund your financial life and goals. Whether that's buying a house or building a diversified portfolio or planning for a special-needs child — all of those things today are being funded through equity compensation. And for our advisors, it's important for us to make sure that they're the best in the industry at being able to help those individuals make those decisions.
FP: What do you think is the biggest advantage to having worked with equity compensation for so many years?
McDonald: I would probably describe it across maybe three elements. A corporate client needs to solve enterprise challenges at scale, using modern technology. We have the most configurable platforms to help them track and record their equity compensation.
Another thing is that we have the largest number of CEPs — certified equity professionals — which is a designation in the industry. And so we have more individuals supporting these clients that understand equity comp, at a certification level, that help them support our clients.
And then the third is that when you have such a large client base, both public and private, you've seen and experienced so many different plans and plans designs. And we bring these professionals together, and they collaborate and share ideas and talk about pain points and taxation and other things that happen. We have this amazing community that makes our corporate clients excited about being part of the Morgan Stanley at Work brand.
Two additional things set us apart. We provide education at scale for our corporate clients and individuals. By having over 600 branches across the country, nearly 16,000 advisors, many of them trained on workplace and workplace benefits, that allows us to scale for our corporate clients. And then, if we're doing that really well, we've earned the right to potentially be their wealth management provider. And we can now do that from someone just getting started with $5,000 using our self-directed and robo platforms all the way through high net worth and family office resources to help founders of billion-dollar companies.
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FP: We're obviously mostly talking about Silicon Valley here, but are you seeing equity compensation plans becoming more common in other parts of the U.S.?
McDonald: I think it's ubiquitous in Silicon Valley, of course, in the tech sector and the startup space, for sure. However, we are seeing growth in terms of equity comp plans across every industry sector. So it's not just the best kept secret of the technology companies on the West Coast.
It's consumer packaged goods, financial services firms. And for good reason, right? It does create a situation where individuals feel ownership in their company. Equity awards are the way that you go about that. Everyone participates, everyone is their own owner, and the behavior and the cultural benefits of that, I think, are being felt widely across every industry sector.
For the individuals, it helps them build financial confidence in their future, as they think about these equity awards as being a big part of their savings, again, whether it's for retirement or to buy a house, or just general financial planning.
And so we're seeing a desire from our partners to add deferred compensation for their senior executives, to add retirement plans or retirement plan consulting, to talk about managed account solutions and financial planning for their employees.
