Morgan Stanley Crushes Earnings Expectations; Wealth Management Outperforms, Profit Margin Pushes Past 27%
Morgan Stanley is moving today, and it has its wealth management division to thank. In two short years executives at the firm have pushed profit margins from roughly 20% in the division, to better than 27% – a number that most thought would take a couple more years to manufacture.
Now, the next profit margin goal has been set by James Gorman – 30%. And all of this as the firm returns to aggressively recruiting large advisors and advisor teams.
Via media reports:
“We delivered strong quarterly earnings across all of our businesses,” CEO James Gorman said in the release. “Firmwide revenues were over $10 billion for the fourth consecutive quarter, resulting in record full year revenues and net income. This consistent performance met all of our stated performance targets.”
Whether good or bad, Morgan Stanley is seen as the purest play in wealth management amongst advisors. It no longer competes with Merrill Lynch in a meaningful way as the ‘whimpering herd’ has been nurtured by Bank of America.
Advisor attrition has slowed based on the firms protocol exit strategy. It seems that the policy is working dramatically better at Morgan Stanley than UBS. And the recently announced comp grid adjustments seem far less obtrusive than those announced by UBS as well.
One manager we spoke to at the firm this AM said the following about the current state of attitudes amongst advisors: “I’d say it’s a 60/40 proposition. 60% are happy with the current trajectory of the firm, and 40% are lukewarm. Some still hold Smith Barney grudges and there isn’t much that can be done about that. But this is a place where the headline on your business card still is a net positive in attracting clients and assets. Most advisors get it.”
Morgan Stanley is in a generally good spot in relation to its wirehouse competition. Of course, that’s a category rife with long term issues, but for today they can bask in the glow of beating earnings expectations.