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Morgan Stanley/UBS Merger “Conversations”

SEPTEMBER 8 – There are rumblings, rumors, conversations, hypotheticals within the wealth management industry that Morgan Stanley has given consideration to buying UBS WMA’s North American operations. We have heard this ‘what if’ from an interesting collage of sources – enough of them that it certainly warrants referencing and discussing. Who are the folks having these conversations and what are their thoughts on a possible Morgan Stanley purchase. Here are a few pieces of multiple conversations:

“The timing seems to be right and the stars may be aligning; you have cost cutting and continued ‘right sizing’ with both organizations and record wealth management profits at both firms. I’ve heard multiple McKinsey folks talk about the “opportunity”. – an East Coast competitor executive.

“The subject has been broached as a “what if’ scenario by folks we trust from a business planning perspective. What if this were to happen – how would we react and what would be our strategy and messaging as a competitor firm?” – a JPMorgan executive in NYC.

“Who is to say that this isn’t a possibility over the next 24 – 36 months. UBS has depleted its investment banking capabilities and mastered wealth management from an ROI perspective. Morgan Stanley is well positioned in the investment banking world, yet playing catch up re: wealth management metrics with respect to UBS. If both firms wanted to dominate the HNW/UNHW segments, cutting the fat on the lower ends of production (removing advisers under $100M in assets and $1M in production) thus boosting revenue per fa and assets per fa to all time highs within the industry; it could be done.” – internal source at McKinsey.

While improbable; based solely on the amount of consolidation that has recently occurred throughout the financial crisis – it is still possible. The synergy that would be available – if the right moves were made at the right time – would turn the proposed “new” organization into both a US and global force that could dominate its rivals. It is an intriguing notion and one that competitors should not consider a far fetched one either. The scale and financial standing of Morgan Stanley would allow for a transaction like this…” – a former UBS executive.

The conversation is intriguing and the rumblings actually make some sense. UBS has long been a part of the conversation when it comes to large scale acquisitions within the wealth management space – but the performance of its executive team and financial advisors have scaled back the innuendo over the years. Will the sustained bull market run create new conversations and new possibilities – or will the memories of 2007-2009 keep decision makers at these organizations powder dry? Time will tell.

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