From the May 2007 issue of Research Magazine • Subscribe!

May 1, 2007

Morgan Stanley's Q1 Margins Are Up; New Designations Win Approval

Change continues to be the name of the game at Morgan Stanley.

On April 1, some 10 years after Morgan Stanley merged with Dean Witter, Morgan Stanley & Company and Morgan Stanley DW Inc. became a single broker-dealer. The company says the move should "enhance the integration of products, services and processes across the firm's various lines of business."

The Global Wealth Management Group, led by James Gorman, recently reported a strong increase in net income for the three months ended February 28: $220 million on sales of $1.5 billion compared with $15 million in the first quarter of last year, when sales were nearly $1.3 billion. The group's pre-tax margin was 15 percent versus 1 percent a year ago.

"Our global wealth management business this quarter delivered its highest revenues since 2000," says Morgan Stanley Chairman and CEO John J. Mack, adding that the firm still has "many opportunities to further improve our performance."

As its quarterly results indicate (see chart), Morgan Stanley's wealth-management group includes fewer advisors than a year ago. But these FAs are keenly focused on clients with $1 million or more in assets. Today, assets of investors with $1 million or more in AUM represent nearly $460 billion of the roughly $660 billion in non-corporate assets managed by Morgan Stanley's FAs. (Including corporate assets, total client assets are $690 billion versus $624 billion a year ago.)

"Morgan Stanley is making the moves that we expect all the wirehouse firms to make, that is focus on fewer, more productive brokers who can build great teams, serve high-net-worth clients, and deliver holistic wealth management services," says Chip Roame, head of Tiburon Strategic Advisors. And Roame gives the firm "high marks" for addressing these issues, many of which are tied to the Dean Witter merger.

To further boost the performance of its advisors, Morgan Stanley's global wealth management Group says it has approved five new professional designations through which its FAs can receive specialized training in areas ranging from trusts and retirement planning to alternative investments and the financial aspects of divorce (see chart).

"Continuing professional education enables financial advisors to sharpen their skills and gain knowledge that will help them advise our clients on a comprehensive range of wealth-management needs," explains Andy Saperstein, chief operating officer of national sales. "We chose these five new educational programs because of their particular relevance to affluent and high-net-worth clients."

This means that Morgan Stanley advisors now have a total of 13 professional designations at their disposal. Other designations, the company says, include those of Certified Financial Planner, Certified Investment Management Analyst and Chartered Financial Analyst.

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Morgan Stanley's Latest Designations

o Certified Trust and Financial Advisor (CTFA), offered by the Institute of Certified Bankers;

o Chartered Alternative Investment Analyst (CAIA), sponsored by the CAIA Association with a focus on hedge funds, private equity, commodities and real estate.

o Chartered Retirement Planning Counselor, offered by the College for Financial Planning with topics such as retirement-plan distribution;

o Chartered Retirement Plans Specialist, also offered by the College for Financial Planning with a focus on plans for businesses; and

o Certified Divorce Financial Analyst, sponsored by the Institute for Divorce Financial Analysts.

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Janet Levaux is the managing editor of Research; reach her at jlevaux@researchmag.com.

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