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Morgan Stanley Shoots for $10T in Assets

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What You Need to Know

  • With the Eaton Vance and E-Trade deals done, the bank’s wealth and investment management units now have combined assets of $5.7 trillion.
  • “We are more convinced than ever that both deals help position Morgan Stanley for growth in the years ahead,” said CEO James Gorman.
  • “The uptake and the interest level [in crypto] has been strong, and we would expect people to continue to be interested in this space,

Morgan Stanley executives have outlined major asset growth targets, as well further cryptocurrency plans and other moves, with the aim of getting the firm across the $10 trillion asset mark.

“My target is $10 trillion of money under management. I tell the team internally they hate that,” CEO James Gorman said during a recent call with equity analysts.

The firm reported first-quarter profits of $4.1 billion, up 143% from last year, despite its $911 million hit tied to the blowup of Archegos Capital Management. 

Earnings per share, excluding costs tied to its purchase of Eaton Vance, rose 120% to $2.22 per share. Also in the quarter, its wealth management revenue in the quarter rose 47% to nearly $6 billion, and net income was up 44% to $1.24 billion. 

Total assets in the wealth unit were $4.23 trillion with $3.35 trillion tied to advisor-led accounts and the remainder in self-directed E-Trade investor accounts. 

“Net new assets were $105 billion, which is easily our best ever quarterly flows and concrete evidence of the growth trajectory of this business,” Gorman said. “These flows represent an annualized increase of over 10% of beginning period assets.” 

Of the wealth flows, $37 billion were of fee-based assets. 

Notably, the wirehouse did not release its total advisor headcount or average 12-month fees and commissions as part of its quarterly financial statement. As of Dec. 31, 2020, its financial advisor headcount was 15,950.

“Consistent with our predominantly advice-driven business model, revenue on these [$3.35 trillion of] assets expressed in basis points … is materially higher than our three larger competitors,” the CEO said, without naming Bank of America, UBS and Wells Fargo.

Crypto Plans

During the call, Chief Financial Officer Jonathan Pruzan described the firm’s approach to cryptocurrency investing, which the firm rolled out on a limited basis a month ago for wealth clients with at least $5 million in assets

It’s a fast-growing space. There’s a lot of interest in the space. And we had a significant interest from our wealth clients to try to get access to this new asset class. And so we tried to facilitate that,” Pruzan said. 

More on this topic

Qualified investors “get access through two specific passive funds,” he added.

“The uptake and the interest level has been strong, and we would expect people to continue to be interested in this space,” according to Pruzan. 

Looking ahead, as the firm sees “more or stronger interest, we will continue to try to work with the regulators and others to provide services that we think are appropriate,” the CFO said.

Asset Levels

With the E-Trade and Eaton Vance deals completed, the bank’s wealth and investment management units now have combined assets of $5.7 trillion. “We are more convinced than ever that both deals help position Morgan Stanley for growth in the years ahead,” Gorman explained.

“When we started the Wealth Management journey 12 years ago, we had $500 billion under management, now we have $4 trillion, and so we’re heading to $10 trillion,” he said. 

“We’ve got all these growth verticals, and I just couldn’t be more excited about it,” the CEO added, after describing the importance of the recent acquisitions of Eaton Vance (which includes Calvert Investments and Parametric), E-Trade and Solium Capital.

Describing how Morgan Stanley plans to grow, Pruzan said the firm is “being very deliberate” investing in platforms, its service model, “gathering data and running pilots to make sure that we understand what we need so we can service our clients better.”

These pilot efforts for financial advisors, for instance, include lead generation based on data analytics and scoring models. “We’re making the investments in the engine that will help us match the FA to the client based on specific needs,” the CFO said. 

And Pruzan remains upbeat on the firm’s net advisor recruiting and retention levels. Over the past few quarters, he said, “we’ve been very active [in recruiting]. We’ve become a destination of choice.”

Recruiting advisors are “talking to their previous colleagues, and therefore, it’s sort of accelerating. So we’ve seen really nice net recruiting,” the CFO said. “We’re bringing in bigger teams, better teams and attrition has dramatically slowed down.”