A silo is a dangerous place to be on Wall Street these days. New Morgan Stanley boss Ted Pick is the industry’s latest leader to tout a silo-busting mindset to get his roughly 80,000 employees to work better together.
Pick is hoping investment bankers will refer millionaire clients to a financial adviser, while employees working on a company’s stock plan can put in a letter good word for Morgan Stanley to win an M&A deal.
Pick used the slogan of “The Integrated Firm” repeatedly in his first letter to shareholders this year and Morgan Stanley insiders talk about this as its next leg of growth.
The idea is hardly a novel one, with Pick telling an industry conference this month that he was “well aware that such phraseology exists at every firm like ours”.
“At some level, it’s motherhood and apple pie, right? Let’s all work together,” Pick joked. And he needn’t have even looked beyond Morgan Stanley for inspiration — John Mack, one of his predecessors, was focusing on building the “one-firm firm” all the way back in the 1990s.
In his 2022 memoir, Mack described how Morgan Stanley was so siloed that divisions had their own summer softball teams and holiday parties. “People could be as competitive inside Morgan Stanley as they were against our Wall Street rivals,” Mack wrote.
Larry Fink introduced a “one BlackRock” principle back in 2012 for the asset manager, while perennial competitor Goldman Sachs has had a “OneGS” initiative in place for almost six years under chief executive David Solomon.
There was even a wink to it in the most recent season of Industry, the raunchy HBO/BBC show about a fictional investment bank called Pierpoint, when one character references a “One Pierpoint” mantra.
Goldman president John Waldron said last month that OneGS “really has a lot to do with figuring out a way to break down the silos of the firm, create incentives in the firm for everybody in the firm to serve our clients holistically”.
For a new CEO like Pick, who is inheriting a business that made $9bn in profits last year and a strategy that investors like, “The Integrated Firm” makes sense — why not try to fine-tune the bank’s moneymaking machine?
It also speaks to two challenges for Morgan Stanley. First, it is harder to grow mature businesses like investment banking and trading where market share has become increasingly concentrated and secular tailwinds are harder to come by.
Goldman has said repeatedly that its OneGS initiative has helped it gain market share, overtaking Morgan Stanley in equities trading and strengthening its spot as Wall Street’s leading M&A adviser. (A retrenchment by some European rivals has also helped.)
Second, firms like Morgan Stanley have expanded so much beyond bread-and-butter investment banking and trading and into money management that they risk leaving money on the table by not ensuring that they are properly synced up. But while it makes sense on paper, actually getting these different divisions to work together can be much more fraught in practice.
Bonuses for working with another division are typically highly discretionary. This can be a turn-off for some employees, though Goldman has explored paying more formulaic bonuses for business referred to its private bank.
Cultural differences also run deep on Wall Street, where firms are often stitched together from acquisitions over many years. (Goldman is an outlier in that it has largely grown without M&A).
The company that Pick runs today is a mix of Morgan Stanley’s investment banking and trading business, brokerage firms Smith Barney and Dean Witter, electronic trading platform ETrade and asset manager Eaton Vance.
For a banker to refer a client to a colleague, they need to trust that the other part of the company is up to the same standard and won’t make them look bad.
“If you’re an investment banker, you don’t want a private banker to do anything that could jeopardise the relationship [with the client], like putting them in a bad investment,” said one banker at a large US firm.
Pick has said the leaders at Morgan Stanley’s different businesses are already on friendly terms, pointing to an unusually calm succession process that saw him become CEO and his two other contenders stick around as co-presidents. “We’ve been unified for a long time,” Pick said this month. “You can’t just wake up one day and say, let’s get along.”
It is not difficult to wonder though how deep such bonhomie runs at Morgan Stanley or any Wall Street bank. Investment banking is not exactly well known for being a kind and gentle world. But no doubt, when the next bank appoints a new CEO, expect the “one” playbook to be dusted off.
joshua.franklin@ft.com
