Operator: We’ll go next to Gerard Cassidy with RBC.
Gerard Cassidy: I have a bigger picture. James, you gave us some very good detail about the expectations for growth in the Wealth Management and the new assets, $1 trillion every three years. When you’re looking at your three channels, the advisor-led workplace and self-directed, where do you see the most growth? And which one has the best margin that can get you to that 30% goal?
James Gorman: Well, the advisor is the biggest, obviously, by far. We have 15,000, 16,000 advisers, phenomenal business. The direct channel is from the acquisition of E*TRADE combined with our Morgan Stanley Direct, great business. Obviously, it’s a little more market sensitive, a little more active, particularly on the option side during bullish market environments. And the workplace is sort of the sleeper. I’ve said previously, I think, two years ago, I thought in a decade, we’d look back at this firm and say that the workplace was the most significant strategic change to happen over the last decade. I truly believe that the workplace employee, the retirement space is sort of the next frontier, and we’re right in the middle of that.
So as to margins, they’re probably margin accretive in reverse order. In other words, workplace first, the direct second and the adviser third, that’s simply a function of advisers. We have adviser payout, and God bless them for the jobs that they do, and we’re very happy to pay them. So I think it’s a combination, Gerard, of all three of them. We will hit the 30% margin. I mean, we’re almost there now in a more challenging environment. So that zero anxiety about whether it’s this year or next year, it’s coming, and all of them will contribute.
Gerard Cassidy: Very good. I appreciate that. And Sharon, you talked about the marks that you took in the corporate loan portfolio in the quarter, just over $350 million, I think you said. Can you share with us how big is that portfolio? And where did the marks come from? Were they bridge loans? Or what drove those marks?
Sharon Yeshaya: So you have different disclosures as it relates to various loans and lending that we gave. As we think about that line, it’s inclusive of losses across the loan portfolio. And it was also worth highlighting there that we also mentioned the interest that you received on the loans that we hold as well as the fees associated with those loans.
Operator: We’ll go next to Mike Mayo with Wells Fargo.
Mike Mayo: James, last quarter, I asked you when will you be ready for plan B if the pipeline doesn’t seem like it’s going to be converted, and you said you’re at plan A minus, so just kind of looking for an update there. And in terms of the headwinds, if I hear you correctly, it sounds like the pipeline is still good but down quarter-over-quarter because some of those deals have converted. And also, you said it’s still not back yet. And as it relates to the Twitter financing, you were the lead bank. Can you disclose any write-down that you had on Twitter or simply the leveraged loan category? So that’s the headwind. On the other hand, I guess, there’s been some reports that you’ve reduced headcount. So if you could just give us more color on that, especially Twitter?
James Gorman: Okay. Let me try and unpack that a little bit. I’m not going to talk about Twitter. We don’t talk about single names as you would expect. You did see the line — the other ISG line. You can assume that whatever marks we took on any single name are reflected in that. And I think the way I think about this is we run a portfolio business. We obviously have single credits at any point in time that disappoint relative to others. But it’s the total package, and the total package, if you look at it actually turned out to be very fine given the environment we’re in. So on the plan B, I don’t know if the rip we did — we took about 1,800 heads in early December, would equate to a plan B. It certainly felt like it. We’ve reduced — we took a severance charge, Mike, which affected some of the efficiency ratio for this year, but we’ll improve it for next year.
And that was the rightsizing. We were frankly a little overdue. We hadn’t done anything for a couple of years. We’ve had a lot of growth, and we’ll continue monitoring that. Obviously, with the way bonus pools work, we reflected the performance of the firm in the bonus pool. So we’re not very different from the rest of the world in that regard. And that obviously resets comp a little bit. So, I feel good about where the whole package is. I’m actually, as I said earlier alluded to I’m a little more confident about the long — medium-term outlook for the market. I’m not talking about the first quarter or two, although Sharon said the first quarter has actually started well. But the medium-term outlook for the markets, I see the Fed has moved from 75 to 50, likely to go to 25.
The next stop on the train line is zero and then to mention they start cutting. Not sure they’re going to cut this year, but I think there’ll be zero increases this year for sure. So that’s the inflection point. And there’s a lot of money sitting around waiting to be put to work. And that’s our job is to be the flow of capital between those who have it, and those who need it. So I’m pretty confident actually about the outlook. So we’re — we’ve done our plan B, I guess. We’re not anticipating a plan C. And we’re going to watch and wait for a little while, but I feel pretty good about it.
