Morgan Stanley designates certain advisors worthy of serving founders

As more companies stay private longer without selling shares on public markets, their founders and chief executives have developed a distinct set of financial needs.

Now Morgan Stanley has a new designation for advisors it deems specially qualified to work with this group of current and potential clients. About 200 of the firm's roughly 15,000 advisors will take on a "founders specialist designation," signaling their expertise in helping clients do everything from starting a company or taking a long-standing private company public to setting up systems to pay employees with company shares and provide other benefits.

The designation comes as part of Morgan Stanley's campaign to build its wealth business through its Morgan Stanley at Work division, which provides services like setting up equity-compensation plans for employers. Morgan Stanley CEO Ted Pick has previously estimated that as much as $5 trillion in client assets could be brought in through the workplace unit. At a recent annual conference, he said that $300 billion in assets has come down the firm's "funnel" to financial advisors from Morgan Stanley at Work in the past five years.

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Advisors can be the gateway to broader array of services

Similarly, Vince Lumia — the head of client segments at Morgan Stanley Wealth Management — wrote in a memo that the firm's advisors are often company founders' gateway to the broader financial services the firm offers, including investment banking. The founders specialist designation is for advisors who can help with not only planning for a business but also for the personal financial needs of company owners and their employees.

"This designation formally recognizes advisors who have a successful track record in working to address the unique wealth management needs of founders and private market executives," Lumia wrote. "This is a client segment that illustrates the power of the Integrated Firm like no other. Whether they seek professional financial guidance, workplace benefits, investment banking, [foreign currency exchange] or corporate cash, we have a distinct strategic advantage in our ability to serve them."

Fewer public companies with firms staying private longer

Morgan Stanley's new designation comes amid a long-running decline in the number of U.S. companies whose shares can be bought and sold on public markets. Dartmouth College's Tuck School of Business reported in September that the number of U.S. publicly traded companies fell from more than 7,000 to fewer than 4,000 from 1996 to 2020, even as the number of public companies has risen in other parts of the world. (Tuck said the culprit was not only a decline in firms' selling stock for the first time through initial public offerings but also a steady stream of mergers among publicly traded companies.)

Meanwhile, the number of "unicorns" — or privately backed companies worth $1 billion or more — has gone globally from just over 400 in 2019 to more than 1,300 last year, according to the financial services and research firm Morningstar. Among those in the U.S. are big names like Elon Musk's space-exploration company SpaceX, founded in 2002 and now valued at $180 billion, and the artificial intelligence pioneer OpenAI, founded in 2015 and now valued at $157 billion.

Morningstar's research suggests private companies are indeed waiting longer to go public. The median age of firms holding initial public offerings rose from 6.9 years in 2014 to 10.7 years in 2024, according to Morningstar, although others have found reason to question if companies are really staying private longer.

The particular needs of company founders

Regardless of the frequency of IPOs, the sheer rise in the number of large private companies means there are plenty of founders and company executives with financial needs different from those of their public market counterparts. Often, according to a person familiar with Morgan Stanley's new founders specialist designation, private firm owners have their wealth much more bound up in their companies than do executives at publicly traded enterprises.

Morgan Stanley wealth head Jed Finn told Bloomberg in an interview about the new designation that founders of private companies "might be worth $100 million on paper, but they can't get a mortgage to buy a house. We know how to model around that."

Much of Morgan Stanley's workplace services originate in its 2019 purchase of the software company Solium Capital. Many of its offerings fall under its Shareworks brand, and include Shareworks Start-up, which sets up equity-compensation plans for new companies, and Shareworks Private, for firms that are bringing in new investors.

For companies that are going to public, Morgan Stanley advisors with the founders specialist designation can help company owners and executives take steps like set up 10b5-1 plans, which govern how executives and other "insiders" buy and sell shares in their own company, and provide 401(k) accounts and other retirement-savings options to employees.

Will founders specialists offer anything new?

Alongside its new category of founders specialists, Morgan Stanley already has designations for advisors who have other specialties, including stock plans, sports and entertainment, private wealth and international clients. A person familiar with the matter said the founders designation is open to advisors who meet various criteria, including "demonstrating proven ability managing substantial founders' assets."

Tim Welsh, an industry consultant and the president of Nexus Strategy, said there's no doubt there's a need for advisors who specialize in financial planning for founders and executives at private firms. But he questioned the need for a special designation for these advisors, noting that Morgan Stanley evidently didn't need it previously to work with founders and similar clients.

"I'm sure people have been working with these folks for decades," he said. "So how rigorous is the designation? Or is it just a marketing gimmick?" 

Morgan Stanley isn't the only firm looking to workplace clients in a bid to bring in assets under management. Citi, for instance, has turned to its Wealth at Work unit, which specializes in working with law firms and professionals, to play a big role in its push to rebuild its wealth management business. And JPMorgan has sought to work more directly with founders and startup firms through advisors it brought on from its 2023 purchase of the now-defunct First Republic Bank.

Welsh said many financial firms with investment banks will offer assistance to company founders as part of the work that they do to take private firms public.

"The questions of how to get them liquidity and how to get them financial planning, those really are the realms of investment banks," Welsh said. "They'll take you public and sell your business for you and help with all the planning issues involved, such as setting up trusts — all the financial planning and estate planning, which can be complicated if the assets you own are privately held."