Morgan Stanley eyes new opportunities as wealth management profit jumps

A lower tax burden, combined with an increase in interest income, boosted the performance of Morgan Stanley Wealth Management in the third quarter.

The wirehouse’s net income rose to $913 million from $698 million the same period a year ago, representing a 31% increase, Morgan Stanley reported Monday.

The firm, which has invested heavily in digital upgrades in recent years, anticipates future growth will come from attracting more assets from existing clients and winning younger customers.

“We know they have assets held elsewhere outside the firm. And we know that our clients are open to sharing more financial information with us,” Morgan Stanley Chief Financial Officer Jonathan Pruzan said during a call with analysts. “Years ago, you wouldn’t want to share all your information with one firm. But we’ve seen that changed.”

The firm has invested more in technologies to ease clients’ ability to share such information.

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Attracting young clients — who may one day become high-net-worth clients — is a longer-term objective, Pruzan added.

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In the meantime, the wirehouse’s advisor ranks remain unchanged. Head count was relatively stable at 15,655 advisors, an increase of 23 brokers from the prior quarter but down 104 from the year-ago period. Advisor productivity rose 5% year-over-year to $1.125 million.

Since leaving the Broker Protocol almost a year ago, the wirehouse has experienced low levels of advisor attrition (Morgan has sued some brokers who left for competitors over alleged violations of non-solicitation agreements). That stands in stark contrast to Wells Fargo, which has struggled to retain its advisor force and lost roughly 1,000 brokers in the two years after a phony accounts scandal came to light.

Morgan Stanley, meanwhile, notched strong growth in client assets, which increased 8% year-over-year to $2.496 trillion. That surpasses Merrill Lynch’s record client balances of $2.38 trillion for the third quarter, which was up 3%.

Morgan Stanley also reported that fee-based asset flows rose to $16.2 billion from $15.8 billion for the year-ago period, a 3% increase. That figure was also up from $15.3 billion for the prior quarter.

The wealth management business had a pretax margin of 27%, up from 26.5% for the same period a year ago.

“This quarter demonstrates once again the stability and health of our wealth business,” Pruzan said.