Lisa Shalett is Chief Investment Officer and Head of the Global Investment Office for Morgan Stanley Wealth Management and a member of both the Global Investment Committee and the Wealth Management Operating Committee. She works to develop portfolio solutions that leverage the firm's strategic and tactical asset allocation advice to meet client goals delivered through both scaled and customized solutions. As part of her role, Lisa leads the development of all asset allocation models, global investment due diligence and portfolio analytics. She also has responsibility for managing the Global Investment Committee's models and Outsourced Chief Investment Office mandates, which collectively have more than $100 billion in assets under management. In addition, Lisa is responsible for Morgan Stanley Wealth Management thought leadership and publishes special reports on topics of importance for practitioners and clients.
Prior to joining the firm in September 2013, Lisa served as chief investment officer of Bank of America Merrill Lynch Global Wealth Management. Previously, she held several senior roles at AllianceBernstein during her 18-year tenure with the firm, including chairman and chief executive officer of Sanford C. Bernstein, LLC, and served as chief investment officer and head of Alliance Growth Equities. Lisa holds a dual Sc.B. degree in applied mathematics and economics from Brown University and an MBA from Harvard Business School. She is a Henry Crown fellow of the Aspen Institute and a founding member of the Financial Fellowship.
The onset of the COVID-19 pandemic sent the markets into a dizzying whiplash, leaving individual investors uncertain and apprehensive about the future. The toll of the pandemic will linger for some time, particularly its effects toward certain sectors and the overall future of work, but one key difference in this recession was the resilient strength of the financial sector. As the fundamentals of the market stayed strong and the prospect of an economic recovery has come quickly into focus, there is a bright light at the end of a dark tunnel.
C-Suite recently spoke with Lisa Shalett, Chief Investment Officer, Morgan Stanley Wealth Management, to discuss her path to the top of one of the largest financial institutions in the U.S., what it means to be truly client-led, and why the recovery post-pandemic will look a lot different than the last cycle.
Lisa Shalett: The first thing I always say about long careers that end up in the C-suite is that they're never planned. Young people, in particular, have a hard time believing it. Great careers are a combination of really hard work, a lot of luck, sponsorship and timing. Mine is no different in that regard. I came out of my MBA years not wanting to have anything to do with Wall Street. I thought for sure that I was going to be a management consultant for my career, and those were the first couple of jobs that I had right after my MBA.
When I began to work, I realized what the day-to-day life of a consultant was. Despite the fact that I was doing incredibly analytical work and solving challenging problems for really interesting clients, I was traveling 24/7, and that just wasn't a sustainable lifestyle. I came back to New York and wanted to apply those same skills and found myself as a sell-side analyst at the beginning of my career at Sanford C. Bernstein, which at the time was an unbelievably unique, independent research boutique.
It was during the late 1990s bull market. We were kind of a different business model in the sense that we didn't have proprietary trading. We didn't have investment banking. We were completely conflict-free in a world way before Eliot Spitzer and the various regulatory rules on work in our business.
I had the opportunity to lead the brokerage business at Sanford C. Bernstein, which allowed me to not only know about research, but also about sales and trading. That opened other doors to me to becoming a portfolio manager and a chief investment officer on the buy-side, which ultimately, through the great financial crisis, allowed me to transition from the institutional side to the wealth management side of the business.
I left Bernstein after about 18 years and moved to Merrill Lynch for a couple of years. I had an opportunity to begin to learn the job of being a chief investment officer, which included asset allocation, thought leadership and building a wealth management research department.
I had the opportunity in 2013 to join Mike Wilson’s team at Morgan Stanley, and that's where I've been ever since. It's been a great fit. For me, I don't know that I had so many obstacles so much as I had opportunities. I think it was a combination of hard work, sponsorship, luck and timing that allowed me to make those transitions.
Shalett: The single most important thing is to remember what it is that we do every day: We're here to serve clients. While it’s very easy to delude ourselves into thinking that we're here to make money, that's not my job. I'm here as a chief investment officer to hire portfolio managers who make people money. My job is to create a disciplined framework for our clients to help them, number one, sleep at night, which means managing their emotions around fear and greed and answering their questions.
Then secondarily, helping them and reminding them what they're investing for—their goals. During a huge portion of my client meetings, while we certainly talk about the markets and where there are money-making opportunities, every single conversation I'm having with a client is customized to their circumstances. My biggest piece of advice is to not be overly reactive to news flow and short-term market moves.
The single most important thing is to remember what it is that we do every day: We’re here to serve clients.
Shalett: Client trust is earned. Happily for us, we did see that on the heels of debt and fiscal stimulus, the likelihood of having a V-shaped recovery was going to be quite high. So, we were very aggressive in recommending that clients get into the market in March, April and May of 2020. As a result, that was a critical thing.
At the end of the day, trust is about being there, picking up the phone or on Zoom calls. Clients need ideas. They need to understand. They need to be educated. We do all those things to be trusted advisors.
Shalett: We have to be careful when we talk about the economy because there are a lot of metrics. The U.S. is already operating at levels at or above where we were before the pandemic, whether we're talking about things like retail sales, corporate profits or things of that nature. One of the areas where we're not operating at levels above the pandemic is the labor market, and the pace of reopening in some of the service industries. We absolutely think we're going to get to a place of 100% healing, but like any other crisis, there's going to be a difference. There are industries that forever are going to be changed.
Basically, my sense is that our economy will get back to where it was pre-pandemic, albeit the contours of the economy underneath the surface will look different.
Shalett: One of the most profound things about the last business cycle during the great financial crisis is that while the government provided stimulus and the Federal Reserve was printing money, a huge portion of that money went to recapitalizing the banking system. The banking system was fixing its balance sheets, becoming re-regulated and not doing a lot of the lending that's required for economic growth. On the housing and household side of the economy, huge numbers of families were recapitalizing their mortgages and restructuring their housing debt, because their housing values were underwater. They, too, were not spending. They were saving to do that. The difference this time is we're coming out of a recession where banks are in excellent shape and have a backdrop of stimulus—so now they can lend those funds that Washington and the Fed put out into the economy, and households have saved and can spend and put money on their credit cards.
When you think about the nature of this crisis, there's a huge amount of pent-up demand. There's pent-up demand to go on vacation and buy big-ticket items on your credit card. There's a huge amount of pent-up demand for banks to actually make loans and extend credit. That is a recipe, in our humble opinion, not for a slow-growth cycle like we saw in the last business cycle, but for a business cycle that's much hotter, but shorter. Much more economic growth, bursts of activities, a lot of vibrancy and new businesses starting up. Something we didn't see last time.