Morgan Stanley Tightens Its Overseas Client Service

The wirehouse says 400 reps will be allowed to serve non-U.S. clients with at least $500,000 in assets

Morgan Stanley (MS) announced this week that just 400 of its U.S. advisors can work with international clients.

The new policy, outlined in a memo, states that nonresident clients will work only with International Client Advisors (ICAs), who will be based in 12 offices in the U.S.

This business, which has about $100 billion in client assets, will include clients that have at least $500,000 in their accounts. Smaller clients will be served by an international call center.

“We are committed to continuously strengthening our International Wealth Management business to help our International Client Advisors more effectively address the specialized investment requirements of non-U.S. resident clients,” said Gregory Fleming, head of wealth and investment management, and Shelley O’Connor, head of field management, in the memo.

“New initiatives will address advisor training and support, jurisdictional opportunities and challenges, and enhancing the international client experience,” they added.

Starting Jan. 1, 2016, advisors who want to be ICAs must meet criteria now being developed by the firm. This means the reps will have to meet a minimum revenue- production level and have a specific number of nonresident client households and/or concentration of total revenue from such households.

“By creating a specialized group of financial advisors trained to serve the unique needs of nonresident clients and backed by dedicated resources designed for this client segment, we will invest in and grow this business, which is already one of Morgan Stanley Wealth Management’s fastest growing specialized segments,” the company said in a fact sheet about the program.

The changes affect U.S.-based advisors serving nonresident clients but not advisors doing business in the Asia-Pacific region, where Morgan Stanley has wealth management offices in Hong Kong, Singapore and five Australian locations.

“These Asia and Australia businesses report to and leverage the firm’s institutional platform, providing clients the same degree of products and capital market access that the firm provides to institutional clients,” the firm said.

The company announced the sale of onshore wealth management operations in Switzerland, the United Kingdom, Italy, Spain, Germany, the United Arab Emirates and India in 2013 and 2014.

In June, the Americas Group, which manages about $2.4 billion for both retail and institutional clients, moved to Raymond James (RJF) in South Florida from Morgan Stanley. It has offices in Boca Raton and Coral Gables and serves high-net-worth individuals, institutions and banks primarily located in the U.S. and the Caribbean.

At the time, Morgan Stanley said it was “no longer able to accommodate [the team’s] business model. They serve a number of smaller central banks in Caribbean and Latin American countries, and for regulatory reasons we are shifting coverage of these clients to our institutional business and will no longer serve them in wealth management,” the wirehouse explained in a statement.

Both U.S. and non-U.S. investors and institutional clients are being affected by a push by authorities worldwide to monitor investments, money flows and revenue payments.

The Foreign Account Tax Compliance Act of 2010, for instance, “aims to collect information on U.S. taxpayers that invest in foreign financial institutions and foreign entities. However, Treasury regulations have effectively extended FATCA’s reach to many foreign entities investing in U.S. financial institutions that are ultimately owned by foreigners,” according to Carlos Somoza, international tax principal at Kaufman Rossin.

Non-U.S. citizens may not realize “that using certain foreign entities (i.e., “personal investment company”) or foreign trusts as an investment vehicle may subject them to reporting requirements under FATCA, and that there are penalties for not complying with those requirements,” Somoza said.