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 charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees
SEC charges Chicago-based investment adviser with overbilling clients more than $2.5M in fees

Eliseo Prisno, a former Merrill advisor, allegedly collected unapproved fees from Filipino clients by secretly accessing their accounts at two separate brokerages.

Apella Wealth comes to Washington with Independence Wealth Advisors
Apella Wealth comes to Washington with Independence Wealth Advisors

The Harford, Connecticut-based RIA is expanding into a new market in the mid-Atlantic region while crossing another billion-dollar milestone.

Citi's Sieg sees rich clients pivoting from US to UK
Citi's Sieg sees rich clients pivoting from US to UK

The Wall Street giant's global wealth head says affluent clients are shifting away from America amid growing fallout from President Donald Trump's hardline politics.

US employment report reactions: Overall better than expected, but concerns with underlying data
US employment report reactions: Overall better than expected, but concerns with underlying data

Chief economists, advisors, and chief investment officers share their reactions to the June US employment report.

Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading
Creative Planning's Peter Mallouk slams 'offensive' congressional stock trading

"This shouldn’t be hard to ban, but neither party will do it. So offensive to the people they serve," RIA titan Peter Mallouk said in a post that referenced Nancy Pelosi's reported stock gains.

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.