James Gorman, Morgan Stanley’s new president and chief executive officer, has outlined some ambitious targets for its global wealth management division, which includes Morgan Stanley Smith Barney.
Speaking at the Morgan Stanley [MS] U.S. Financials Conference in New York Tuesday, He presented the firm’s global wealth division as the number one in the market in terms of the number of advisors (18,135), client assets ($1.6 trillion), revenues ($3.1 billion) and number of advisors on Barron’s Top 100 list (31).
However, he conceded, “being big of itself does not get you to the finish line.”
Gorman said he expected to boost the pre-tax margin at the business from its current 8% to 15% this year and over 20% in 2011. He is also focused on boosting client assets, predicting that the wealth management division would attract over $20 billion in net client assets this year, and a further $50 billion in 2011. In 2009, the division lost a net $13 billion in client asset outflows. Gorman said this was largely due to legacy Smith Barney advisors leaving and taking client assets with them.
However, Gorman says that the outflows moderated in the fourth quarter of last year to $4.7 billion, versus $8.8 billion in the third quarter, and he expects to see negative or slightly positive asset flows this quarter, and then positive flows for the rest of the year.
Alois Pirker, a research director at Boston-based consultant Aite Group, says Gorman’s targets are aggressive but not unexpected. “He has an ambitious personality … and he needs to keep the ship on course during the integration,” he says. While he thinks the $50 billion in net new assets for 2011 is “on the high side” Pirker believes it is achievable with such a large brokerage force, provided the integration goes smoothly.
And the firm seems to be doing a good job of keeping hold of its advisors. Gorman reiterated that recruiting had significantly slowed, which he described it as “a good thing for all of us”, and said attrition for the top two quintiles in the division was less than 2% in 2009 and he expects it to stay below 5% for the next two years. He also expects the number of advisors to stabilize at around 18,000, down from over 20,000 when the joint venture closed in May last year.