Hired advisors account for most of Morgan Stanley’s net new asset growth, executives say

July 15, 2021

Successful advisors adding new clients and consolidating existing client assets fueled the “vast majority” of Morgan Stanley’s net new asset growth, according to two executives. This is true even though the spinning mill expects its self-managed and workplace channels to contribute significantly to inflows, the two executives said.

Morgan Stanley’s new net assets across all channels (advisor-led, self-managed and in the workplace) amounted to $ 71.2 billion, down 32% from the previous quarter, announced Thursday the company with its second quarter results.

For the first six months of the year, however, the company’s new net assets climbed to $ 176 billion, representing an annualized growth rate of 9%, Morgan Stanley executives noted.

Notably, it’s not the self-managed and workplace channels, or even the newly hired advisers, that have the credit for adding the bulk of the new net assets to Morgan Stanley, one of two senior executives at wealth management, who both asked not to be named, told AdvisorHub on Thursday.

Instead, existing advisers are responsible for growth, attracting new clients and persuading existing clients to add to their positions, they said.

Assets of advisor-led clients increased 6% from the previous quarter and 38% from the quarter last year to $ 3.5 trillion, the company said.

In recent months, Morgan Stanley has reinvented its business model with the acquisition last year of E * Trade Financial. Since then, James Gorman, managing director of the bank, has frequently emphasized the idea that the self-managed platform, along with a strengthened work channel, creates strategic portals through which his company will attract new client assets.

Gorman struck that note again Thursday, telling stock analysts on a conference call after the bank announced its second quarter results that Morgan Stanley has built a new “mouse trap.”

“We are creating an advisory channel, which in fact has deep organic growth levers. You combine that with the direct platform and a work platform and you have three legitimate channels pouring assets into the house, ”Gorman said. With E * Trade and its workplace channel, the company has developed 13 million relationships in its wealth management unit, he said.

Overall, the Wealth Division pre-tax margin, a key benchmark Gorman uses to benchmark performance, stood at 27%, down from 24% in the last year’s quarter, the company reported. Net income rose 30% year-over-year to $ 6.1 billion, and pre-tax profit rose 43% to $ 1.64 billion, the company said.

The Wealth Division managed $ 4.5 trillion at the end of the second quarter on its advisor-led, self-directed and workplace channels, an increase of 7% from the previous quarter and 71% from the previous quarter. quarter of last year, the company reported.

Morgan Stanley’s self-managed assets rose 13% sequentially to $ 993 billion, with no comparisons available for the previous year’s quarter, as that was before the October 2020 finalization of its E * Trade purchase, a reported the company. The self-managed chain now has more than 7.4 million households as customers, Sharon Yeshaya, Morgan Stanley’s new chief financial officer, told stock analysts on Thursday’s call.

But the integration of the three channels is still ongoing and is not complete.

The company plans to continue building its advisor-led and self-managed platforms this year, so that customers can, with a single authentication, access the assets of either of those accounts, the two said. executives who spoke to AdvisorHub. “We’re sort of rolling out this as we speak,” and the launch will be complete by the third quarter of this year, one predicted.

Morgan Stanley Work Channel clients will all end up having seamless access to accounts on other platforms as well, but that’s not true for 50% of them now, and probably won’t be for 90. % of them before the second half of 2022, according to Yeshaya.

But despite all the delays for the final integration of his three wealth channels, Gorman remains convinced that Morgan Stanley has set up a future that will turn the page of recent years when his house of wire, like its rivals, “struggled” for. stop the outflow of assets to robo-advisers and independent channels due to “poor training and very high attrition rate,” he told stock analysts.

Michael J. Birnbaum