Morgan Stanley Chairman & CEO James Gorman (Photo: AP)

Morgan Stanley’s wealth management business helped the firm top analysts’ estimates for earnings in the second quarter. The group — which includes 15,633 advisors — grew net income 9% year over year to $953 million and sales 2% to $4.41 billion. 

Still, the firm’s overall results were hurt by weakness in its institutional securities business. It reported total revenues of $10.2 billion, down 3% from last year. And its profits fell 10% to $2.2 billion, or $1.23 per share.

“Wealth management produced record profits before taxes [of $1.24 billion] and a margin of 28.2% [at] the top end of guidance,” Chairman and CEO James Gorman said on a call with equity analysts Thursday.

This performance “illustrates the resilience of the model. Higher asset levels and strong loan balance growth more than offset the effects of lower interest rates,” he said.

More Results

Overall, the company’s advisor headcount rose 1 from a year ago but is down 75 from the prior quarter.

Average yearly fees and commissions per advisor of $1.13 million are up slightly from $1.11 million a year ago and down somewhat from $1.19 million in the prior quarter.  Merrill’s average production level for its 14,690 FAs is $1.08 million overall, and $1.4 million for veteran advisors. 

The average level of assets per advisor is $164 million, and total assets in the wealth unit are $2.6 trillion.

As for net fee-based asset flows, they stood at $9.8 billion for Q2’19; this is down about 35% from both Q2’18 and 1Q’19. Yesterday, rival Merrill Lynch reported a 50% year-over-year drop in net flows to $5.3 billion.

Morgan Stanley’s fee-based asset level is about $1.16 trillion and represents 45% of total assets. 

“We have plateaued a little bit. It’s bounced around sort of 43%, 44%, 45%. We do still believe that that number will go higher and could clearly go towards 50% and beyond, as we continue to refine our offering,” Gorman explained on the call.

— Check out Merrill Says RIA Option Is a No-Go on ThinkAdvisor.