Morgan Stanley announced Wednesday, July 21, that its global wealth management clients withdrew net $5.5 billion during the second quarter, including net outflows of $7.9 billion in the United States and net inflows in overseas offices of $2.4 billion.
In the first quarter, the wealth-management operations had net inflows of $9.3 billion.
“It was a tough environment for retail investors, especially post-flash crash,” said CFO Ruth Porat in a conference call with equity analysts, adding that clients often withdraw funds during tax season.
Morgan Stanley CEO James Gorman stated several months ago that the company’s goal is to boost client assets by $20 billion.
The company’s total client assets of $1.5 trillion at the end of June were down 6 percent from the first quarter, but topped last year’s $1.42 trillion.
During the July 21 call, Gorman said that Morgan Stanley is “not overly concerned” with the $5.5 billion outflow. This represents about $10 million in revenue per quarter of $40 million in yearly sales, he adds.
Rival Merrill Lynch reported some $1.4 billion in client balances for the second quarter, down from the first quarter by about $50 million and up by about $80 million from the year-ago quarter.
The number of Morgan Stanley financial advisors – including those involved in the joint venture with Smith Barney — fell by about 50 to 18,087 during the quarter from the previous period. It declined by 2 percent from the second quarter last year, when the firm had 18,444 FAs.
Morgan Stanley has a 51% interest in the joint venture with former-Smith Barney owner Citigroup.
Advisor turnover in the top two performing quintiles (or the upper 40% in terms of fees and commissions) “is low,” according to Porat. In terms of the movement of teams out of Morgan Stanley Smith Barney, she says there “isn’t much.”
In early July, MSSB attracted two teams from UBS in New York and Canton, Ohio, for instance, while in late May it lost a Charlotte, N.C.-based team to Baird.
Average revenue per adviser also fell slightly, to $679,000 from $685,000 in the first quarter. It grew slightly over the same period last year, when average sales per broker were $671,000.
In its second quarter, Merrill Lynch had 15,142 financial advisors vs. 15,005 in the previous quarter and 15,008 a year ago.