Morgan Stanley's haul of net new assets slowed slightly in 2024 even as the Wall Street giant trudged steadily on toward its goal of having $10 trillion under management.
The megabank reported Thursday that it brought in $252 billion in net new assets in all of 2024. That number — a key measure of how well a firm is doing at increasing asset totals without help from the stock market and other investments — was down slightly from its haul of $282 billion in 2023 but still far ahead of the $89 billion it had in 2022.
Morgan Stanley's net new inflows helped boost its asset total for its wealth and investment management unit to $7.9 trillion by the end of the year. That was up from $6.6 trillion at
CEO Ted Pick acknowledged in a call with analysts that many of the gains no doubt resulted from last year's bull run in stocks. But buoyed by markets or not, he said, 2024's haul was still "$1.3 trillion in a year."
"That, I think, speaks for itself in terms of our ability to continue to stay on … this commitment to get to $10 trillion," Pick said.
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The asset haul helped boost Morgan Stanley's wealth and investment management division's revenue by 13% to $7.5 billion in the fourth quarter. Its profits before taxes were up nearly 44% to just over $2.1 billion.
What happened to $1 trillion in new assets every three years?
Despite the mostly rising numbers across the board, there were some rumblings in Thursdsay's earnings call that the firm was falling short. Analyst Christian Bolu at Autonomous Research noted that Morgan Stanley executives had previously talked about reaching the $10 trillion benchmark by adding $1 trillion in net new assets every three years.
"Over the last three years, total flows have been so much short of that sort of that $1 trillion target, and have been at the lower end of your 5% to 7% organic growth target," Bolu said. "So maybe just talk through how you think about the ability to accelerate organic growth going forward?"
Pick said he and his colleagues are putting less emphasis on the total number and are looking more at the quality of inflows. He noted that $123 billion of the firm's net new assets in 2024 went into fee-generating accounts, up from $109 billion the previous year. The firm saw its fee-based revenue rise by 21% to $17 billion in 2024.
Fee-generating assets are considered particularly desirable because of their ability to produce steady streams of income, unlike assets in brokerage accounts that make money only when individual transactions occur. Pick told analysts Thursday that fee-based asset inflows are "the ultimate outcome."
"So I'm less wrapped around the axle on whether we are at $700 [billion] or $800 [billion] versus $1.23 trillion in a given three-year period," he said, adding that he's more interested in whether the asset haul "translates into financial advisory fee-based flows."
30% operating margin
Morgan Stanley Chief Financial Officer Sharon Yeshaya separately provided some perspective on another of the firm's long-standing goals: achieving an operating margin of 30%. Morgan Stanley's wealth unit saw this margin — its ratio of expenses to revenue — rise to 28% in the third quarter only to fall back slightly to 27.5% in the fourth quarter.
Similar to Pick, Yeshaya said she's less interested in the actual number than in making sure the firm can reach its goals in a "durable" way. That means she and other executives are not willing to sacrifice
"The last thing one would want to do is put a target out there, see a change in dynamics — all of a sudden markets go down or there's some shock that we're unaware of — and you're unable to meet those targets and you pull back investments," Yeshaya said.
Advisor-led accounts, E-Trade and Morgan Stanley at Work
Of Morgan Stanley's $7.9 trillion in assets under management, nearly $6.2 trillion was held in the firm's wealth management division (leaving more than $1.6 trillion in investment management). Morgan Stanley reported increases in all three major components of its wealth unit: advisor-led accounts; self-directed accounts held mainly through its online E-Trade brokerage service; and
Morgan Stanley's advisor-led channel ended the year with $4.8 trillion in assets (up 20% year over year), its self-directed channel with $1.4 trillion (up 25%) and its workplace division with $475 billion in unvested stock plans (up 14%). Morgan Stanley often refers to its wealth unit as a "funnel" that brings new clients in either through E-Trade accounts or through
"This commitment to get to $10 trillion, and whether that takes X years or X plus one year or X plus two years, we want to get the kind of assets that ultimately work their way through the funnel," Pick said.
Anti-money laundering and 'sweeps'
But questions have arisen about whether Morgan Stanley is being careful enough from a regulatory perspective with how it goes about gathering assets. Various federal agencies
Pick largely sidestepped an analyst's question Thursday about the firm's anti-money-laundering policies.
"What we're trying to do, and what we've been actively pursuing, is making sure that across the firm, not just specific to wealth, we can service and look and impact all of our clients," he said. "And moreover, you can see that very well in terms of our ability to actually continue to attract assets. We'll be making all of the necessary investments to continue to be world-class, both across people and our technology."
Yeshaya was more direct when asked about another controversy entangling Morgan Stanley and many other wealth managers. Morgan Stanley is among the many firms responding to
Responding to an inquiry from analyst Brennan Hawken of UBS, Yeshaya said this "might be the first time in two years that I'm excited to answer a sweep question."
The biggest change for sweep accounts has come from the Federal Reserve's recent decisions to ease interest rates downward. That has made many clients less inclined to hold cash for the long term — where it recently could earn as much as 5% just sitting in a money market — and gotten them more interested in stocks and other investments.
Morgan Stanley has long maintained its sweeps accounts were always intended to provide customers with a safe place to park their money while they decided how to invest it.
"Now that rates have come down, the markets are going up, it feels to be somewhat more normalized," Yeshaya said. "It's acting transactional, which is what we had always assumed — that there would be some level of transactional cash."
