Morgan Stanley’s Prime Brokerage business, which has become a crucial component of the firm’s Institutional Equity Division, has had a simple strategy from inception: a steadfast adherence to—and a singular focus on—being the best possible partner to clients who want a partner.
As we approach the 30th anniversary of its 1985 founding, Morgan Stanley’s Prime Brokerage business has become a crucial component of the firm’s Institutional Equity Division (IED). Prime Brokerage strategy has been simple from inception: a steadfast adherence to—and a singular focus on—being the best possible partner to clients who want a partner.
"It’s a cliché that everyone in the financial services business says they want to be your partner. But the word 'partner' doesn’t mean 'we hope you do lots of business with us,' " says Alex Ehrlich, Global Co-Head of Prime Brokerage. "The principles of partnership have to be part of the fabric of our culture, because if you don’t have a partnership culture within Prime Brokerage and the broader IED business, it’s just not possible to behave as a great partner to your clients."
According to Alan Thomas, Global Co-Head of Prime Brokerage, the foundation of long-term, sustainable competitive advantage on Wall Street is culture. "What we promote is a culture where we attract smart, ambitious, hardworking people, and then teach them, from the moment they’re recruited, and throughout their careers—that we work together in order to make each other better.”
If this sounds a bit like an attempt to create a culture of empathy, there’s a reason for that: It is.
"At every level, everyone you work with is your client. Most people think of their manager as their client, but that’s just the obvious starting point. People junior to you are your clients, the people above you are your clients, and most importantly, your peers are your clients,” says Ehrlich. The rule of thumb for thinking about teamwork is simple: "We all work in teams every single day, and a team with a positive culture creates more than the sum of its parts because its people feel empowered to share everything they can in the interest of serving the client.”
It is this culture of partnership and its bespoke approach that distinguishes the Institutional Equities Division and Morgan Stanley, Ehrlich says, and one that attracts some 60 to 100 new hedge-fund launches annually, as well as many of the world’s largest established alternative asset managers.
"Fledgling hedge fund managers are entrepreneurs launching small businesses and taking the greatest professional risk of their lives, putting their own personal wealth on the line, as well as that of family and friends," says Ehrlich. "And that is where Prime Brokerage feels an acute obligation to live up to its partnership ethos."
When a client selects a prime broker as they set up a new hedge fund business, they truly are engaging a 'partner,' whether or not they realize it at the time. Prime Brokerage helps these managers set up their business, their infrastructure, their marketing capability, and their finance and operating models. The firm knows from decades of experience that, long after the new business has launched, clients will look back on their experience with their chosen prime broker as a partnership. "And the critical question is whether the experience will have cemented the partnership, or undermined it," Ehrlich says.
The partnership culture of Morgan Stanley does not deny the intensely aggressive nature of the business. "Wall Street is a very competitive place," says Ehrlich, "and we need and appreciate people who are great competitors." At the same time, he adds, it’s important that people direct those competitive spirits outward, as opposed to thinking they can enhance their careers at the expense of their colleagues. "We reward people not just for being great at their job, but also for making each other better. Empathy is in the best interest of our clients.”