January 19, 2012

Q4 Earnings: Morgan Stanley Posts Loss, Reports Lower Asset Flows, FA Headcount

The wealth-management firm shifts its method of counting advisors but says the year-over-year figure dropped 5%

Morgan Stanley headquarters in Times Square. (Photo: AP) Morgan Stanley headquarters in Times Square. (Photo: AP)

Morgan Stanley (MS) reported a loss from continuing operations of $227 million, or $0.14 per share, vs. net income of $871 million, or $0.44 per share, for the same period a year ago–topping analysts’ forecasts. The loss was tied to a $1.7 billion legal settlement and issues related to MBIA and credit-default swaps.

The company, led by James Gorman, said its revenue for the period fell to $5.7 billion from $9.9 billion in the previous quarter and $7.7 billion a year ago. Much of the decline was reported by the institutional-securities unit.

Its wealth-management unit saw its flows of net new assets drop about 60% from both the third quarter and the year-ago period to $6 billion. Flows in fee-based asset accounts were down 51% sequentially and 61% year over year to $4.9 billion.

Rival Bank of America (BAC) reported a similar amount of net new assets in the fourth quarter, roughly $5.5 billion, for its global-wealth operations, which include Merrill Lynch.

Morgan Stanley, which says it moved to streamline the job descriptions of advisors and staff at its legacy Morgan Stanley and Smith Barney channels, had a pre-adjusted total of 17,156 financial advisors as of Dec. 30.–and 17,649 advisors after accounting for the adjustment.  

Overall, its advisor force shrunk about 1% for the quarter (or by some 140 FAs) and declined roughly 5% for the full year (a drop of about 800 FAs).

Morgan Stanley has instituted a series of job cuts in the past few years, which included the firing of low-producing reps.

The average yearly sales (or fees and commissions) per advisor were about $745,000 as of Dec. 30, a 1% increase from the earlier quarter and year-ago period.

Broader Results

Total assets in the wealth-management unit were $1.65 billion, a 5% jump for the quarter and 1% drop from the fourth quarter of 2010. Per advisor, assets under management are about $95 million, a slight increase from the earlier and year-ago periods.

“In 2011, Morgan Stanley’s wealth-management unit had global fee-based asset flows of $42.5 billion and net new assets of $35.8 billion, the highest for both since the inception of the Morgan Stanley Smith Barney joint venture,” the company said in a press release.

“The year's pre-tax margin improved to 10% from 9% a year ago,” it added.

According to Gorman, "For the past year, Morgan Stanley has made enormous progress by addressing a number of outstanding strategic and legacy issues … We ended the year in better shape than where we started and we are well positioned to deliver improved returns to shareholders in 2012 and beyond."

On Tuesday, Citi (C) said its latest results included $43 million from brokerage and asset management sales, down from $136 million a year ago, largely reflecting a decline in the equity contribution from the Morgan Stanley Smith Barney joint venture.

See AdvisorOne's Q4 earnings calendar for the financial sector.

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