Big Transformations in the Employee Stock Ownership World… Including A Quick “Who’s Who” Analysis

We literally jerked to attention when we saw the news on page-one of the WSJ that Morgan Stanley is acquiring Solium Capital, Inc. - a Canadian firm “which manages the stock that employees receive as part of their pay”… for a whopping $900 million … “the largest takeover by any Wall Street firm since the [financial industry] crisis.”

And wow! Solium has 3,000 clients! With one million employee accounts - to Morgan Stanley’s 330 clients…but with 1.5 million employee accounts - which is particularly impressive in a business that has, historically, been aimed primarily at senior executives - as part of their major focus on “wealth management strategies” - rather than on the needs of “ordinary folks.”

Any way you slice it, this is a MAJOR development in the populous and highly-fragmented group of Employee Plan service providers. Coming as it does, so close on the heels of Computershare’s November 2018 acquisition of Equatex Group Holding AG - formerly the European share plans business of UBS - that provides equity compensation administration services to 160 clients servicing over 1.1 million share plan participants, mostly in Europe - it sets up a global race, we think, to grab market share - that will change the face of the industry.

Here in the U.S. the major-players include…

• Fidelity - with 400-500 Plans covering lots of senior execs and millions of regular folks.
• Vanguard has about 300 clients…with a mix, we think, mostly of “regular folks”
• E-Trade is surprisingly large - and very highly rated by clients - with 600-700 clients, with participants across all income groups. we are told
• BofA’s Merrill Lynch unit has about 300 clients - with services aimed primarily at senior execs, and a “wealth-management” focus.
• Computershare, which focuses primarily on ‘regular employees’ in the U.S. has roughly 300 clients here - with large numbers of small participants - but with very large numbers of clients, and mostly retail Plan participants in Australia and the U.K.
• AST has about 300 clients too - mostly small companies, but with a much broader mix of always demanding “senior execs”…so kind of a nice niche for them, we think
• Charles Schwab is mostly “boutique-ish” we’re told - with an outstanding reputation for service and about 100 clients

Interestingly, both Morgan Stanley and Solium get only “fair-to-middlin’” grades from clients on “overall satisfaction.”  Same with their “loyalty scores” too - as compiled by professional Plan-Raters, Group 5…

Even more interesting, we think, Equiniti - which is a major player in the U.K. has yet to throw its hat into the ring in the U.S. where, almost certainly we think, they will want to do so…

So stay tuned, dear readers! But note carefully: These are very difficult businesses to run well: All Plan participants feel “entitled” - with top execs feeling “extra entitled” to red-carpet treatment. And OUCH! The high-service/high margin plans - aimed primarily at the top dogs - require constant I-T investments to keep up with the inventiveness of the comp consultants, which has served to bifurcate most of the U.S. service-provider market. Prepare for a free-for-all we say!