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April 21, 2017 at 10:26 AM
Morgan Stanley reported strong results earlier this week, with its first-quarter net income jumping 70% year over year, to $1.93 billion, and revenue increasing 25% to $9.75 billion.
Meanwhile, the wealth unit had an even bigger jump in net income, which rose 31%.
On a conference call with equity analysts, CFO Jonathan Pruzan gushed about its performance.
(Related: 11 Best & Worst Broker-Dealers: Q4 Earnings)
The unit’s pre-tax margin, 24%, was the highest since the firm acquired Smith Barney, he said. “Importantly, drivers of this business are healthy. We witnessed increased fee-based asset flows, additional lending, better client engagement and [limited] FA attrition.”
Plus, total client assets hit $2.2 trillion, and fee-based assets grew 6% to $927 billion, including net asset flows of $19 billion.
“This represents the highest fee-based asset flows since the fourth quarter of 2014,” he added.
1. DOL, Fee-Based Momentum Up
Rival Merrill Lynch said early on that it would move to a fee-only structure to address the Department of Labor’s fiduciary rule, which is now delayed. Recently, though, the wirehouse conceded that commissions-based accounts might make sense for some clients.
For its part, Morgan Stanley insists it has been “very consistent in saying that we want to provide our clients choice, and we will continue to do that with compliance solutions if DOL goes into effect,” Pruzan explained.
In general, the wealth unit has “good momentum broadly in the business,” with fee-based assets and other benefits.
“[All] of that momentum is playing well in our system, in our network,” the CFO said on the call.
2. Financial Advisor Movement Slows
While fee-based flows are up thanks to DOL, the movement of advisors has generally come to a standstill.
