With the S&P 500 stock index up more than 22% so far in 2024, wealth management firms and units of larger banks are enjoying heady returns, with Morgan Stanley the latest to join the party and reporting net new assets of $63.9 billion for the three months ending in September, and increase of 79% from the same time last year.
Now with $6 trillion in assets in its wealth management group, the firm’s success in driving net new assets in the door was driven by asset gathering across multiple channels, according to the company.
One measure of a wealth management firm’s success, from large to small, is its ability to drive new assets, either from new or existing clients, to its platform. Executives at Morgan Stanley in the past have stated its goal is to hit $10 trillion in client assets in the future.
And Morgan Stanley’s wealth and investment management group has not been the only firm seeing success in gathering new assets. Fee-based advisory assets at Bank of America’s global wealth and investment management group had net inflows of $21 billion for the three months ending in September, the bank reported this week.
Concerns over the summer by investors in banks due to increased interest rates that wealth management companies were paying on some clients’ cash holdings also seem to have disappeared as the calendar has turned.
“When Bank of America Corp. and Wells Fargo & Co. reported strong wealth management results there was some debate as to whether strength would prove anomalous; following impressive prints at both the Chrles Schwab Corp. and Morgan Stanley, it is clear that the industry is benefiting from strong tailwinds, with LPL Financial Holdings Inc. our highest conviction long in the space,” wrote Steven Chubak, managing director of Wolfe Research, in a note to investors Wednesday morning.
After Morgan Stanley released its third quarter earnings report this morning, the price of the bank’s shares hit a new 52-week high, up almost 7% at 2:00 and trading at $119.75.
LPL Financial Holdings releases its third quarter earnings later this month.
Indeed, concerns over paying higher interest rates on cash could be ameliorated in the future if lower interest rates drive more banking transactions by clients, including refinancing and mortgages, said Sharon Yeshaya, chief financial officer.
“This is the second quarter that we've seen loan growth,” Yeshaya said. “We've seen stronger quarters. So, this is just the beginning.”
“Basically, there's been a steady increase in mortgages, even though there's the rate hike cycle where it is and the rates were higher,” she said. “And over time, as rates would come down, you'd expect to begin to see refinancing activity, which will spur lending.”
In the third quarter, Morgan Stanley’s wealth management business reported record net revenues of $7.3 billion, up 14% from the same time last year. Profit before taxes was $2.06 billion, up 21% from last year’s third quarter.
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