Market turmoil hurts revenue at Morgan Stanley wealth unit

Market turmoil hurts revenue at Morgan Stanley wealth unit
CEO James Gorman says DOL's fiduciary rule isn't "the be-all and end-all" for the bank's brokerage business.
MAY 03, 2016
Market volatility hurt revenue at Morgan Stanley's wealth-management business in the first quarter amid investors' concerns about the health of the global economy. The unit's $3.7 billion of revenue was down 2% from last year's fourth quarter and fell 4% from the first quarter of 2015, according to Morgan Stanley spokesman James Wiggins. While client assets rose 1% to $2 trillion from the fourth quarter, they were down 2% year-over-year. “Client assets are down given the volatility in the market,” Jonathan Pruzan, Morgan Stanley's chief financial officer, said during an earnings call Monday with investors and analysts. There was “muted client activity in an unfavorable market.” Investors have been grappling with concerns about an economic slowdown in China, negative interest rates internationally and questions surrounding the number of times the Federal Reserve will hike rates in the U.S. this year. Despite these headwinds, Mr. Pruzan said the bank is “very pleased” with the relative “stability" in wealth management. Morgan Stanley had 15,888 financial advisers at the end of March, little changed from the end of last year and the first quarter of 2015, according to Mr. Wiggins. The firm would like to keep the pool, which is the largest in the brokerage industry, at roughly that size, Mr Pruzan said. Morgan Stanley's advisers produced $923,000 of annualized revenue in the first quarter, down 3% from the fourth quarter and off 4% from the first three months of 2015, according to the spokesman. While the firm continues to digest the “nitty gritty” of the Labor Department's fiduciary rule released this month, Morgan Stanley had been preparing for the new regulation for a while and making the necessary investments to comply, according to Mr. Pruzan. (More: Coverage of the DOL rule from every angle) The rule, which requires advisers to put the interest of their clients ahead of their own when handling retirement accounts, has been a major focus of the brokerage industry as many firms will have to increase their investments in compliance and technology. The risk of running afoul of the highly prescriptive regulation also has prompted concern. Morgan Stanley is creating a help desk to handle questions that brokers might have on the new best-interests rule, according to Christine Jockle, a spokeswoman for the firm. The Labor Department's fiduciary rule runs more than 1,000 pages. “It's good to have it in writing,” James Gorman, the bank's chief executive officer, said of the long-anticipated regulation. While important, he said “it's not the be-all and end-all” for Morgan Stanley's wealth management business.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.