Morgan Stanley Dean Witter & Co. is eyeing further expansion in the international private client market, even as the ink dries on its deal to buy the British asset manager Quilter Holdings Co.
We will be looking to acquire similar advice-based franchises in Europe, said Richard M. DeMartini, chairman and chief executive officer of Morgan Stanleys international private client group. And the New York giant will look beyond Europe to Asia, with a particular eye on Japan, he said.
The $254.5 million deal for 223-year old Quilter, announced Thursday, would give Morgan Stanley access to a growing high-net-worth market in Britain. The deal is not Morgan Stanleys first foray into the European retail investment market; two years ago it acquired AB Asesores, a financial service provider in Spain.
The Quilter deal, which is expected to close in the first quarter, would increase the assets Morgan manages for European private clients by 54%, to $20 billion, the company said.
Europe presents an attractive growth opportunity, Mr. DeMartini said in an interview. Britain, where equity ownership is expected to balloon over the next few years, offers a particular opportunity, he said.
Seventeen percent of U.K. households own securities, but thats expected to grow to 40% in three to five years, he said.
Barrie Catchpole, managing director of Quilter, said Britains wealthy investors are steadily building their portfolios. High-net-worth assets there are expected to reach just under $3 trillion by 2005, according to data compiled by Cap Gemini Consulting,.
Mr. Catchpole said that the average investor portfolio at Quilter is currently over $500,000.
For investment houses that have honed their skills managing money for private clients in the United States, the rest of the world presents many opportunities. Seven million individuals worldwide have investable assets of over $1 million each, according to a recently released survey by New York-based Merrill in conjunction with Cap Gemini.
Like Morgan Stanley, its U.S. peers are not stopping at Europe. Chase Manhattan Corp. boosted its investment management presence in Asia by acquiring Britains Robert Fleming Holdings in August. And Merrill Lynch & Co. is also setting its sights on Asia, particularly Japan.
But the traffic for individual investors assets goes both ways. Even as U.S. financial services companies look to participate in foreign retail investment markets, foreign-owned banks are increasingly doing business in this country.
UBS AGs acquisition of PaineWebber Group last month puts the Swiss banking giant toe to toe with the likes of Merrill and Morgan Stanley in the United States.
For U.S.-based financial services companies, Europe presents a market that resembles that of the United States in the 1970s, said Dean Eberling, an equity analyst at New York firm Keefe, Bruyette & Woods Inc. A deal like the Quilter one clearly makes sense when its negligible impact on the bottom line of a company the size of Morgan Stanley is compared with the deals strategic benefits, he said.
Meanwhile, for foreign financial companies coming to the United States, there are benefits to be obtained that go beyond simply gaining access to U.S. investors, Mr. Eberling said.
For as important as it is getting yourself on the beach in the U.S., its as important to able to export that expertise back to your own home turf, he said.