Pretax profits at Morgan Stanley’s Wealth Management unit climbed 24% to $973 million during what CEO James Gorman called “one of the strongest quarters in recent history.”
The division reported records Wednesday morning in net income before taxes, revenue ($4.06 billion) and client assets ($2.19 trillion) amid a pretax margin of 24% in the first quarter of the year. Wealth Management comprised roughly 42% of the firm’s revenue over the period.
The earnings, which far
The flat recruiting figures contrasted with record annual production level per adviser of $1.03 million. Fee-based client assets grew 16% from the first quarter of 2016 and 6% from the fourth quarter to a record $927 billion.
New fee-based assets hit $18.8 billion, triple the figure of a year ago and the highest total since the fourth quarter of 2014, Morgan Stanley CFO Jonathan Pruzan noted on the company’s earnings call.
“All our businesses performed well in improved market conditions,” Gorman said in a statement. “We are confident in our business model and the opportunities ahead, while recognizing that the environment remains uncertain.”
A look at starting payouts for elite wealth managers.
RECRUITING IN THE FIDUCIARY ERA
The
“We’re prepared, if it does go into effect, to be compliant,” Pruzan said in response to an analyst’s question about the rule, noting the growth in fee-based assets. “All of that momentum is playing well in our system, in our network.”
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James Gorman laid out plans for the wealth management unit, which turned in record earnings for the fourth quarter.
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An ongoing heavy focus on the business unit has benefited the overall firm.
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The wirehouse will make “many” of the pricing and product design changes it planned last year, include lowering commissions for trades involving stocks and ETFs “to the benefit of our clients,” according to an internal memo.
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The executive, who oversees the investment bank and retail brokerage units, was paid $15.3 million in 2015.
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He admitted, though, that the rule has “probably” hurt the firm’s recruiting.
Asked for clarification, a company spokesman says in an email that guidance from the DoL last year suggesting that recruiting deals create conflicts of interest led to restructured offers and a subsequent slowdown across the industry.
Indeed, Merrill Lynch disclosed it lost 145 advisers over the first quarter, and Wells Fargo’s headcount
Yet the firm’s headcount did increase slightly in the first quarter. Its adviser productivity grew 2% over the previous quarter and 11% from the prior year, which the spokesman notes is "way above the comparable changes in the size of the force."
The company has also allowed its advisers more flexibility to offer commission-based retirement accounts, which Merrill had pledged to eliminate entirely under the rule. Morgan’s approach played a role in its
Wealth Management accounted for the second-highest revenue and profits of Morgan’s three units. The company reported $1.9 billion in profits overall and $1.00 in earnings per share, compared to $1.1 billion and $0.55 a year ago. Its stock value grew nearly 3% to $42.38 a share by Wednesday afternoon.
