Okay, everybody. Thank you so much for joining us. I want to just say, I am so delighted to welcome Ted Pick, Chairman and CEO of Morgan Stanley back to the stage. Ted, it is an honor to be with you this afternoon to discuss your vision for the outlook for Morgan Stanley. Thanks so much for joining us.
The honor is mine, Betsy. You started this 17 years ago. Here we are. I appreciate you inviting me, and thanks to everyone for joining us today. It'll be fun.
All right, great. Let's go. Let's kick off by talking about growth. I hear that with the integrated firm, we might be having an incremental level of growth versus without the integrated firm.
Well, I think that it's a pretty good time to be in the capital markets business. We're seeing in both of the businesses we're in, the securities business, which is investment banking. Sorry, I turned my chair too much and one of my major shareholders is going to get the side look. I'm going to adjust now.
Would you-
I'm just doing the straight up look.
Do you want to swap seats?
I'm torn between Betsy and Steve Wharton. I'm going to do this.
We can swap seats, Ted.
I'm going to do this. No, we're all good.
Okay.
We'll give each other a look occasionally. We're in these two major businesses, where the TAMs are growing by one to two times nominal GDP. We're in the securities business, which is investment banking and markets, and we're in the wealth and asset management business. To be in those two businesses, and those two businesses exclusively, makes life a lot more simple for us. We have a mantra around our core strategy, which is the first of our four pillars, which is we raise, manage, and allocate capital, and both those businesses are trust businesses. They're both really working, again, at probably the higher end of the one to two times GDP level.
The idea of the two businesses working together is this notion of the integrated firm, which we've been talking about for many years, but really have put into motion over the last two and a half years. It's exciting to see it's in the bloodstream across the partnership. If I look at the Institutional Securities business, that first business, the investment banking and markets business. We are in a moment when the life cycle of traditional investment banking business is actually coming to the fore. Okay, we talked about this for years leading into the pandemic and then coming out of the pandemic, and then there was the SPAC bubble and rates rising and then it got quiet again, and now it's really happening.
We're in an environment with real cost of capital, the challenges and opportunities associated with AI, the geopolitical reality, the question becomes, well, what's Morgan Stanley's edge in all of that? I think our edge is content. 15 years ago, you and I were mired in the worst of this MiFID idea, which was going to separate advice and research away from execution altogether. That's a long time ago, I see Katy here. She was covering Apple, now she runs our global research department, amongst other things. Betsy, you and I were together, that continuity and delivery of content really matters.
It really matters because when you have something that you don't know when it's going to come, it's sort of almost like the Leninist thing where history, nothing happens, all of a sudden, a lot of history happens in a short period of time. We're in that moment with respect to the AI transformation effect. We need to have the delivery of content in place. I see it inside of the investment banking flywheel proper, where we are an advisor on lead transactions. We're, of course, seeing it in the mega IPOs that are beginning this week. We're seeing it also in the activation of the dormant sponsor community, where there are the better part of $1,400 billion companies. You can discount that as you wish, there are a whole bunch of private companies, well more than 1,000, that need to be harvested.
You see it in the reality of strategics competing against that because, of course, these same sponsors have $1.3 trillion of dry powder. There's a lot of core investment banking activity, which is accelerated by this AI phenomenon, which begins with the content that we delivered. What's most exciting today is that if I look at our markets business, once upon a time, better part of 15 years ago, coming out of the financial crisis, we came up with a nine-box paradigm in equities, where we had cash equities, prime brokerage, and derivatives. The cash equities business was meant to be a barbell.
Now we go all these years later, there are very few firms that on a global basis, whether you're in Hong Kong or in Paris or New York, you can actually prosecute enormous flow for market makers and hedge funds and the like, we're one of very few. At the other end of the barbell, of course, you have the delivery of advice and high touch. You have the offering of leverage and financial relationships. That's prime brokerage proper. That's at an all-time high for us. The key is the derivatives product. The derivatives product is one that's really been invigorated over the last several years on the back of this content, which allows us to find asset managers, connect them with you to corporates who want to talk about ideas across asset classes. That involves a heck of a lot of organization, intuition.
Time is the enemy. When do you have the CEO? When do you have the asset manager? By the way, they're also now wealth clients. It's a super interesting time to leverage off of content, the integrated firm, and this AI phenomenon to produce real outcomes inside of one box, which happens to be the derivatives box across the world. If I go to the last piece of the ISG, our institutional securities business, I talk about our fixed income business. That has been reimagined into a business where we are a financier, a leading lender to sophisticated corporates, sponsors that really want to know that we have some game intellectual capital about optimizing their capital structure, and we're a leading player with some of these alt managers, as you know, in that space.
We've also continued to invest over the many years in commodities. That's, of course, paying off today. Through some of the hard work that we did internally, we were able to, in this moment where there's a bit of a regulatory normalization, we've been able to reset some of our derivatives businesses that were sitting in the securities business into the bank. That is something that dates all the way back to the GFC, and it's something that puts us pari passu with others in the fixed income space like us. In totality, when you look at investment banking proper, the equities business, the nine boxes sort of on fire now, and the fixed income business, I think it's fair to say that the securities business, investment banking, and markets across the integrated firm is really humming right now. That's the ISG story.
Near term, very strong.
Markets are obviously always the key variable of when pencil's down and you have an exogenous event. We've seen those. There's a period of time where pencils go down or it becomes very hard for clients to manage risk and then have us work with them on that. Putting those periods aside, I think what we're seeing today, Betsy, is that the investment bank, again, investment banking plus markets, is operating at a higher plane of performance. The goal here as a management team, understanding there is cyclicality in this business, to the extent that you believe in economic cycles, is this notion of higher highs and higher lows. That's very important to us. It's not so much that we can sort of on the blow-off stage print the biggest numbers, but we have to have demonstrated operating leverage.
That's why these last quarters have been so important, that we're set up with enough of a durable franchise inside of the advice giving, inside of the lending, such that, again, we're going for the highest earnings multiple we can muster through the cycle, that there will be higher lows when activities are quieter.
Excellent. Let's switch.
What'd you think?
Yeah. No.
Okay, good.
Sounds like a good plan to me.
Okay, good.
Sounds like one that you have articulated before and are now executing on that higher high, it seems like. Yeah.
That's the idea.
How about let's shift to wealth and investment management.
Right.
Where the question in the room is, you're doing great with over $9 trillion in combined client assets.
Right.
How are you thinking about that as you are just hair's breadth away from the $10 trillion goal?
Right. That's a bogey that we've had, as you say, on our strategic objectives list, that we would have $10 trillion across wealth and investment management, $10 trillion plus. I think we are now at a stage where we can talk about $10 trillion in wealth alone. Okay? Just the way the momentum continues to work its way through the funnel, that $9 trillion between the two businesses, seven and change and two, I think I could imagine a world where in the fullness of time we get to 10 in the wealth business alone and we keep going. That is a function of the success of sort of the ingenious framework around the funnel. To remind people, the funnel really is the self-directed platform, i.e.
E*TRADE, our Workplace product, and of course, the 15,000 financial advisors. If I had to pick one of the three pieces of the funnel to call out here, it would be Workplace. Workplace, we have seen $100 billion of new flows, we call them reinvestment flows, go from E*TRADE or Workplace to the financial advisor last year alone. We've seen $400 billion move from E*TRADE or Workplace to financial advisors since 2020. That continues. Okay? It's not just the net new assets that are coming into the funnel every quarter against an ever bigger denominator, but there's also just the reinvestment effect inside the funnel. That's very exciting. The question is, what are we going to do with the funnel to sort of amplify the effect?
I think one example would be that we go back in time, and the other would be we go forward in time. The back in time is effectively, and it's sort of relevant given what's happening this week in the IPO market, is this notion of private companies. In the Workplace space, as you know, we bank over 50% of the S&P. I was involved in a bake-off very recently for a large cap company, so it'll be a takeaway of a public company. We'll see if we win. We hope we win. Getting a lot of attention top of house. By the way, those existing public companies have $500 billion of unvested securities sitting in employee accounts. It's another $500 that we can naturally get after. On the private company score, we're already banking nine of the 10 unicorns.
These are companies that we've been banking from the time that we hooked up in joint venture form with Carta to get a hold of their cap table. We are already migrating with these companies as they go on the path to becoming public. Given that companies are staying public two or three times longer, but in fact, they're showing, again, IPOs are back, and they are coming back in all kinds of shapes and sizes. It's a heck of a good thing to already be inside of the clothing of the company through the Workplace channel. That's incredibly exciting. That links to the private asset space overall, our ability to market make and sit between the issuer and the investor.
That was the raison d'être of the bolt-on EquityZen transaction that we completed a couple of quarters ago, and the early returns on that are very positive. Where we will not only have your full E*TRADE plus Workplace plus financial advisor kit for public securities, but we'll also be able to do so for private securities in a way that fits the advisory model. On the forward, say, okay, well, what's on the forward? The forward, and my guess is we'll talk about it later, is sort of digital assets. That we are starting to think smart about digital assets, and that is important. Of course, even through the ups and downs, wealth continues to be generally under-allocated to alts.
If you step back from all, I say, holy smokes, you got the funnel regular way, but you're talking about privates, digital assets, alts, and then AI enablement. There's a heck of a lot going on that will not only broaden but also deepen the funnel.
Okay. That's all targeted towards wealth-
Yep.
that we just discussed.
Yep.
What about investment management?
The IM business is a stable business where we have pockets of real strength in homegrown alts product, in fixed income, in real assets, in liquidity. Then there's a gem inside of IM, which is this Parametric machine, which has become the leading player in the tax optimization market. That is really important to this notion of the integrated firm, because it's not always going to be the case that every single part of the firm can work together all the time on an integrated firm basis because you need some church and state. The reality is Parametric is a perfect example of where IM can connect with our wealth business and our securities and banking business.
It's been a huge winner, and it's exciting to see that become a vibrant part of the investment management business, which overall we retain a lot of option value on. Given kind of how some of the names in the space have traded over the last six, 12 months kind of come back to earth, there is a land of opportunity if we decided to go down the inorganic track.
Let's talk first about how you are investing for all that growth that you just outlined. Are we at a spot where investments are moving higher or not?
I think that's a really important question, Betsy, because we needed to demonstrate operating leverage through this cycle. We needed to demonstrate that we could drive revenues at one to two times GDP, and that there'd be operating leverage that would be visible on the bottom line which would adhere to this notion of a 70% efficiency ratio or better, which of course is just the reciprocal one minus the margin, right? That we would be able to, as an enterprise, generate 30% margins when things were good or even better at the enterprise level. That's the notion of higher highs, and we've done that, and that's important for folks to see even as we carry excess capital. The question then becomes, what about at the segment level?
I think at the segment level, when things are really working and ISG is doing its job of managing its capital allocation and banking the right clients and opportunities, and we're properly running our markets business, there should be manifestly operating leverage inside of the securities business. There should be, there has to be, and there has been, and there continues to be. The question becomes in the wealth business, what are you really solving for? I think what you're really solving for is to continue to drive net new assets into the funnel. That they are fee-based flows. They are high-quality, durable flows. They may be transaction-based in the early cycle, but as appropriate, they may migrate to the advisor, or they may migrate from somewhere else in the funnel to get to the advisor. Really important.
That the funnel becomes something that is friendly in a technology-forward context, which is why it's so important that we can be fluent on what we're doing in privates. Because obviously, there's some innovation associated with bringing transparency to the privates market and making it something that is user-friendly for the high-net-worth individual to have an allocation to. Same goes for alts. Same goes for digital assets. We're also looking to continue to expand the pie and draw in deposits and grow the thing. I recall some years ago, as our owners do, that we were traveling in that segment, wealth, in the low 20s margins. Then we went through a period where it was mid-20s margin, then we went through a period where it was mid to high, then high, then high to 30%.
The moon and the stars aligned, and we hit 30% last quarter. Seasonality, great. I would think that the plan that we wish to pursue here for the next period is one where we're not going to manage to the margin, but to give a sense of the divisional outcome, that we'll be bouncing around that 30% number. Okay? When there's seasonality, it's tax season. By definition, that means there's distraction because folks are focused on making the nut to the IRS, less activity with the FA to generate new P&L. You move to other seasons. I think that the bouncing around 30% idea is a nice breath enough that you can invest in the businesses we're talking about, especially in AI-enabled businesses that we're going to talk about, but also hold some accountability to the overall firm efficiency target.
With the fullness of time, because we want to outperform, right? You want to out-deliver over time. When the time comes, we can revisit whether the range is higher. This idea of bouncing around 30% feels right to me as a calibration of prosecuting the business, generating sufficient operating leverage at the firm level, also not scrimping on unnecessary investments we want to make around alts, around tax optimization strategies from Parametric, around digital assets, around privates, and around AI.
Before we get to digital assets and AI, I do want to just ask about white space for growth in the three sleeves, ISG, wealth, and investment management. You have talked about for many decades white space as driving growth when you were running all the various businesses you ran before becoming CEO. As you sit and look at the three sleeves, three business lines, do you see any white spaces that we should be in that we're not?
Of course, one's perspective modulates a little bit when you're the principal. I think we have sort of a paradox, and I think it's a good paradox amongst our senior management team, which is we have been successful as a firm in transformational M&A. Smith Barney, E*TRADE, Eaton Vance. We've been successful on bolt-ons. Mesa West, Solium, which became part of the genesis for having a leading stock plan business, and now we believe EquityZen. Against three transformational transactions and three bolt-ons, you'd say you're good at M&A, just do your thing. I think there's humility that's shared with Andy Saperstein and Dan Simkowitz, our two Co-Presidents who are the two Co-Heads of Strategy, and the entire management team, that M&A in this industry is really challenging, and we want to get it right.
The smallest transaction or something that has some appeal on initial headline can drag you down in a rabbit hole, especially if the regulatory environment gets tighter and you get distracted from the core strategy. The core strategy is one where we have two TAMs, the securities business, investment banking, trading, and wealth and asset management that are organically growing, again, at one to two times nominal GDP, are growing, I would argue, further because we got the integrated firm concept bolted down. I would argue as a first answer and a continuing answer, we like the organic strategy. That having been said, it is the case that because we're in a deregulatory or normalized regulatory environment, we are very much keeping our eye on sort of competition and strategy amongst new entrants and the incumbents, some of whom wish to go to other spaces.
It could be possible in a world where you have valuations start to move in different places for different participants, that there could be some M&A activity in the space, and we want to be wide awake to that. One of the axioms at our place is we're not going to do strategy by envy because we raise, manage, and allocate capital. Three years from now, hopefully we'll be sitting here saying we raise, manage, and allocate capital. That's what we do. We're not going to deviate from that. Is it possible that there would be places in the wealth management space where we could continue to deepen or broaden our already industry-leading position in the U.S.? I do believe that. Are there places around the world where we could potentially bolt on strategies across the integrated firm? Perhaps.
Rule of law, transparency, cross-jurisdictional regulatory environments, these are challenges. We can talk more about that, but that's part of the incremental hurdle of going outside of your home domain, especially in the times we live in. To answer your question with some meat on the bone, I would say that I could imagine in the wealth management space and in some elements of the asset management space, although there, in the classic asset management deal, personalities come together, comp plans come together, you pay for the talent twice. The incumbent's not so happy. These are things we all know. All right. The question becomes, couldn't we just build it? What's the rush? Let's just build it properly over time.
There could be a tool, or there could be something inside of the wealth management business that Andy and Dan argue with the management team that would actually make us even a more robust competitor. That's something we're going to continue to look at. EquityZen was relatively small, but that was having cataloged a whole bunch of candidates. This is the one that we liked. I think there's a framework that's been inculcated in us that I think is an important one to sort of think about, which is strategy. What's the strategy? Do we have our strategy? What's Morgan Stanley's strategy? Morgan Stanley's strategy is to raise, manage, and allocate capital for institutions and individuals. That's the one sentence. That's our strategy. Does this deviate from the core strategy? What's the culture?
Our culture is rigor, humility, and partnership, and every single managing director of Morgan Stanley knows that, repeats it, and we try every day to live by that. Does the culture of the new player feel the same way? They're more entrepreneurial. We may be viewed as more bureaucratic. We're more regulated. They're more kind of freewheeling. Of course, you have to adjust for size and the journey, but does it work? Comes, does the timing work? Then comes price. I think that, and you can debate whether it should be timing versus price or price versus timing. I would argue given what we've built and given what we know to be the last hard miles of integrating acquisitions five, six, seven years later, when the blue's off the rose, and now you're with Morgan Stanley, and how is it? And how's it going?
Are we keeping share up? Are we making that brand? Are we preserving what we got and making it better, à la Smith Barney, à la E*TRADE? That question is one that we think about as we enter into potential ideas. Yes, there's some white space. Yes, we talk about ideas extensively. Yes, we're in a world now where our competitors have capital buffers, and then there are new technology entrants, but it's a cliché to say we're keeping the bar high, but we're living by that. I would be remiss not to say there are opportunities that are coming at us. Okay? People have comparatively good currencies to play with. We're also keeping an eye, again, without doing the envy thing on what that player may be doing two seats down.
We touched on a little bit just digital assets, which after 10 years of discussing and debating will it ever happen, is beginning to happen.
Yes.
Is there any-
You called that. You were early on that.
Is there anything there that would be of-
I think there's something there there now. I do think there's something there there because I think what will happen is, I think we all are living the reality that the traditional finance world and the digital world are going to start to come together. At the individual level the next generation is going to want to participate in both worlds. You can almost imagine the idea of the prime broker to the individual. How do I optimize everything from your atomically movable cash through your entire asset allocation for you, your lifetime, and the next lifetime? It has to be done in a facile technology-friendly way with all of the resiliency that a firm like Morgan Stanley brings, then also leading to the delivery of financial advice.
I think our view would be that we wish to be agnostic with respect to the old world, or I'll call it loosely, DeFi world, certainly the digital asset world, where we want to be able to operate in both. Our clients, they will want that. We're anticipating that. You have anticipated that, and it's notable that you're going to spend time with Amy Oldenburg from our investment management business later today because there's an example where we now buy, sell, trade spot. We built a wallet along with help from Zerohash. There's the ability to trade coin, but more importantly, there's going to be the ability with time to borrow and lend.
That's the key, that you can basically treat it as an asset where you can obtain leverage or it's just a natural part of your portfolio as a high net worth individual or as an institution. It takes time. There's all kinds of regulatory inconsistencies and trial and error and who's a player and who's not, and we ultimately, once we put our name on it, have to make sure that it works. We've been aggressive in our thinking about the future, but we've been a little more painstaking in our execution. Now, Amy's a perfect example, having launched an ETP, an equity traded product, out of MSIM that effectively allows you to trade some of this product. That is kind of a show on the institutional side and on the investment management side that this is for real. We're doing it kind of on the institutional side.
That kind of, again, integrated firm where digital assets, and again, Betsy, you're early on this. I think it's now coming to pass. It'll be a slow journey, but we're on the program. At some level, we, as the wealth manager of choice and as a global investment bank, we're going to be increasingly agnostic with respect to how you hold your assets. We just need to be able to operate in both worlds, which I imagine a number of years from now, those worlds will not have a distinction.
That's robust.
It'll take time.
Right. Yeah. My conversation with Amy is at 4:45 today. We'll dig in a little deeper on these topics.
4:45.
We have you for 12 minutes, and we need to address a couple other topics. Thank you.
Yeah, 12 minutes and 45 seconds.
Yes. Okay. Tick-tock.
I may take it to 14.
All right. AI.
AI. Oh, okay. 12 minutes and 40 seconds.
How does AI fit into your strategy?
Oh, yeah, AI. When I wrote our pithy and annual letter a couple months ago, This is no great insight, of course. I took the view that there were two major themes for 2026. The first was the reality of ongoing geopolitics manifest in now a second war in the Middle East, and that if the war dragged on, it would inevitably lead to the importing of inflation around the world. First, the energy complex to those that don't have the ability to heat their homes, and then second, potentially food product and the rest. Issue one. Issue two, this notion that the coming of age of AI was not just at the consumer level, but the democratization would be felt at the enterprise level.
That does not sound like a terribly insightful thing to say, two months ago even, it wasn't so clear, as we suggested, that the interdependence between these two phenomena would be as extraordinary as they are. Geopolitics and sort of now AI. Here we are. I think the way to think about, of course, is it's both the opportunity of our time and the challenge of our time. I think we should embrace that, again, to use the word paradox. I think that the reality is that our management team has shown some real dexterity around that paradox. Organizations like Morgan Stanley are quite good at playing defense. When we got to play defense on a topic, we'll play defense. Defend. There are other contexts where whether it's a client or a situation, we circle the wagons and we defend.
In other instances, we're going to play offense. We're going to get after this. We're going to go get the ball. The ball may be 10 years off. We're going to get the ball. This one is one where you got to play offense and defense, and sometimes contemporaneously, and sometimes it's some of the same people. You better have a management team that is talking constantly, that has fluency around that which is wheat versus chaff, that which is integral to how the place continues to be best in class as a resiliency matter, but also as a place that feels like it's got the future in its veins. The management team has, again, shown dexterity on that front.
I'll point to an example that's still in beta but is sort of emblematic of our thinking about the forward AI impact and how it will resonate with our clients, but also work well with our colleagues. In the wealth management business, imagine basically a series of modules, where you have a Morgan Stanley Assist. Let's say there are three of them. Morgan Stanley Assist will be effectively someone who can be a companion to the CSA. You are able to get a wire in, you're able to pay a tuition bill. The reality is, I don't really want to call my FA to talk about the tuition bill. He's going to go on a harangue about something. He doesn't want to talk to me because I'm going to do my bit.
Let's just find a way to get this done that is efficient and works well with the CSA at any hour. Morgan Stanley Assist. An amazing kind of ability to go through the entire glossary of all the things I've ever done, when I do them, how I do them. Where's the wire to? How is it sent? Is it a partial? All that important stuff. The second piece is Morgan Stanley Advisor, okay? Which is this notion of, I am effectively looking at potential portfolio adjustments. I'm looking at how I want to calibrate certain assets. I'm looking at tax optimization. I'm kind of playing around with it. I'm not sure. I'm heavy in privates, I'm light in privates. I want to play around with it.
It's not making decisions for me, of course, and I'm not making decisions, but I can really go down whatever rabbit hole I want. Okay. Then there's the full-blown Morgan Stanley AI Assist. Okay. The Morgan Stanley AI Assist is, if the first is kind of helping to do cleanup, and the second is kind of looking at potential models or frameworks, the third one is effectively, and this is in the future, and of course, it's going to have all the attenuated regulatory and careful look at testing. It's not tomorrow's business, but the beta has been put in front of our top financial advisors. Okay. The Chairman's Club, the top of the top. Effectively taking it to the user, which is super interesting. Rather than holding it back, show it to them, even in partial form. The reception has been quite positive. Very positive.
The third is about effectively having a conversation around what I might do across anything that could be a topic. That by the time you get to the advisor, the advisor's enemy is time. The advisor can't talk to nine people at once. If the advisor knows that we are going to go through a quick inventory of all the things that you've been executing on that are hurly burly, some stuff that you modeled, I didn't know you were that interested in metals, and stuff that actually you played through off hours with someone who can retrieve information and answer questions quite fluently based on past interactions. When you get to the advisor, the productivity goes up. If you're a top advisor, what's the game? The game is, I want more assets. I want them to be durable. I want them to be advisory assets.
I want my client to feel like they're being totally taken care of, that there's privacy within the four walls of Morgan Stanley. This stuff is inside of the Morgan Stanley business. We are all working together to drive a more productive outcome. That, for me, is incredibly exciting in the three assist form. There are obviously all kinds of examples that we've all been reading about and hearing about that happen in the markets businesses with agents working in the electronic businesses, the normalization of Greeks across various businesses and cross assets. Those are all happening and are also happening in infrastructure. I'll give you as the last illustration, we were looking recently in our privates business, which is a year we're investing heavily in, a way to try to bring together some of the privates inventory, so it was user-friendly for some of the financial advisors.
There was sort of an undertaking of getting all of the universe of stuff that's in our orb somewhere and bringing it together. The assessment was, across a world-class technology organization, that it was going to take several weeks. Several weeks. Underline several. It took several days. Small example, bite-size example, inventory, making it fit for use, fit for purpose, which means it's got to go through all the testing and all the other stuff to make sure that you can actually roll the thing out. What took weeks, days. Is that going to apply across everything? Of course not. Here's an example where we're able to get something that is going to be delivered to the client, that's going to matter on the front end. We're able to take some of our operational excellence and reduce the time lapse from weeks to days.
Taken across all that, AI, yes, challenges, they will be with everybody at every level. Corporate, every institution is going to be facing that reality, every individual. There's also the enormous opportunity set that exists to better service our clients and then to be able to use our edge, our intellectual capital, to actually be the basis for the interaction. Why? Do you want to interact with me? You want to interact with me? You want to interact with you? Because we have content and because there's trust. I can get access. I have the barbell. I can get access to markets. You can help me get access to other harder-to-get things, privates, new issues, et cetera. Ultimately, it's about the trust and the advice that is going to now be even more optimally technology-enabled.
Okay, I'm hearing more productivity, both top line and efficiency.
Over time.
Seems like that's the case. Across the firm. Okay, we're going to treat this as a lightning round.
Go.
[audio distortion]
You said when we were coming on, "I don't have enough questions. This is going to take forever." I said, "I'm telling you, trust me." Right? I think it went cool. Give me another half hour.
Not only-
I have people who have told you to-
Not only did you fill the time, but with content that is highly-
Oh-
high quality.
Thank you so much.
My last question for you is going to be on two points.
You're the best, Betsy.
Okay. We have one minute each. International growth.
Everyone wants to be reassured, you know. Everyone. That was very nice. That's going to carry us through the last couple of minutes.
Okay. International growth and capital buffers.
Okay. International growth, I think we talked a little bit about that. Rule of law, where we're not going to get mired in some kind of jurisdictional issue with beneficial ownership and with who's done what to whom when there's a change in government. My illustrative on this would be that we do our quarterly board meetings, but we also do a once per annum strategy board meeting. Two years ago, or I should say a year plus several weeks ago, we did it in Tokyo, and several weeks ago, we did this year's in London. I would say that should give you a sense. Rule of law, where we believe the Morgan Stanley proposition is differentiated. When you go to Asia, we're an Asia house. Okay? You did your time in Asia. Goodness knows I've done my time in Asia, and you see what-
Yes, I-
Sorry.
I hear you travel to Asia three times a year.
Yep.
On trips.
Yep.
That's-
It's good.
three out of four quarters of the year.
Love it. It's good. It's better going west than coming back east.
You just got back the other day.
Yes. Our management team travels. We're travelers. In Asia particularly, Korea is the hottest market in the world. We have a vibrant business in Taipei. Of course, we have 15,000 people under this lightning style. In Mumbai, Bengaluru. It's not just an infrastructure play, it's a markets play. Hong Kong, 2,500 people, leading prime broker, world-class investment banking business there. The entire integrated firm is world-class in Hong Kong and has been for years. Then Japan. Mitsubishi owns a quarter of Morgan Stanley. MUFG did so at the time of the financial crisis. They have a new CEO named Junichi Hanzawa, he's a great guy. The now ascendant chair, Hiro Kamezawa, is on our board. We just did our 33rd meeting together. 33rd meeting, home and away, every six months. 33rd meeting.
We are not just once in a while visiting Tokyo. We're there two, three, four, five times a year to talk about what more we can do in Japan. We've been doing that from a very difficult period when naturally at JPY 90 and sort of zero- negative interest rate economy, we had our regulatory, as an industry, challenges to be able to do anything. What are we doing in Japan? The answer is, with the benefit of hindsight, without being arrogant about it, we were preparing. Now we are big players in Japan, there is a ton of opportunity around savings to investment, we have a trusted partner who we are knitted with, that is super exciting.
We had Alliance 2.0, where we treated Bank of Tokyo Foreign Exchange, brought together the research businesses. Now we have a whole bunch of people thinking about Alliance 3.0. Briefly on Europe, U.K. is a fabulous place for us to do business, we should be taking a good look at that. On capital, as you know, SLR got moved off as the governor for a lot of the firms. Really, CET1 exercise, we were at 15.1 in the latest quarter versus 11.8. That's 330 basis points. We like the idea of having incremental financial strength. There are firms out there's one in particular that's sort of viewed as the kind of capital buffer of last resort around the world.
We want to be viewed as when stuff comes, as it inevitably does in this industry in the world, people are running uphill, they're going to run towards us. We've got the incremental capital and liquidity, it hasn't really impaired returns in any way. It hasn't diluted returns. We're carrying extra capital, yes. We're in an unusual year, as you know, where there was no actual test. There was a scenario, there's results. Vice Chair Miki Bowman's done a wonderful job of trying to shepherd the group and get us to what we want to get to, which is Basel III endgame finalization. Morgan Stanley very much wants that to happen. We're supportive. We will probably get relief on, I don't want to put the cart before the horse, we'll probably get G-SIB relief, which is one component of that measurement.
There'll be some RWA inflation against it. The offset should be that we are flat to better on our capital requirements, which are already, as I said, 300 basis points plus above the bogey. Why does that matter? That matters because then we can make tactical considerations when certain markets are behaving in a way where we want to put more capital behind clients or situations in Asia or in the U.S. or in Europe. We can do that tactically. We have the wherewithal to sort of get after that. Strategically, if we do decide to do something that is beyond just investing in these two great TAM businesses, that in the fullness of time, we wish to do something inorganically, we're going to have the capital buffer to be able to do it.
Finally, with respect to kind of the forced ranking of how we think about all of this, first you're hearing me say repeatedly, we want to invest in the integrated firm. We want to invest in these two TAMs, the markets and banking business, ISG, Institutional Securities Group, and then wealth and asset management. Second is this road of the dividend. The dividend got up to $0.35 in 2021. We doubled it to $0.70. We've been moving that dividend prudently, carefully, like a very large cap company should be thinking about it, continue to work the dividend. We will continue to work the dividend in a prudent way that is important for our income holders. The buyback we'll do opportunistically, and we've been consistent on that. I would note that we zigged a little while some have zagged.
Some folks have gone to payout ratios that were much higher. We took the view as a management team two and a half years ago that we actually wanted to accrete capital and did accrete just over $15 billion over the last nine quarters. We feel really good about that because it puts us in a position where we have not only the buffer and the valuation that reflects that, but also the ability to play when the lights are green for us.
Excellent. What I'm hearing is growth opportunities across the firm with the integrated firm powering and operating leverage with capital optimization. As the analyst on stage here said to me that your returns on tangible equity are moving in the right direction, let's call it.
I would say integrated firm is working, just like you said, Betsy. I think for shareholders who know us well and have owned us for a long time and are looking into the forward, higher highs and higher lows. That's the idea. There will be some cyclicality in investment banking and markets. We know that. Have we demonstrated operating leverage, and can we retain that? Importantly, this wealth juggernaut is going to keep on progressing, and we're going to continue to invest in it so that over time, we're going to be able to generate the kind of operating leverage people would want to see through the cycle.
Excellent. Thank you so much, Ted, for joining us.
Thanks for having me.