Morgan Stanley on Wednesday reported stronger revenue and profits for its fourth quarter ended Dec. 31, citing its wealth management division as a major driver of growth in the quarter, with its advisor-led channel remaining the main driver of net new asset growth and its workplace channel called a key to its success.
"I'm incredibly excited" about the future of the workplace business, CEO James Gorman said on an earnings call. "As we've said before, we see the channel as a funnel for client and asset acquisition to sustain growth going forward. We now have over $500 billion of unvested assets, and expect to retain an increasing proportion of these assets as they vest."
In 2021, the company had a 24% workplace retention rate, up from a 21% retention rate in 2020, he said. "Given our focused effort, our longer-term goal is to reach 30% retention," he disclosed, saying the new metric "illustrates the strength of the workplace business to augment net new assets to wealth management."
Morgan Stanley's workplace strategy was "ignited" in 2019 with the acquisition of stock-plan administrator Solium Capital, now Shareworks by Morgan Stanley, and then again with the acquisition of E-Trade, a Morgan Stanley spokeswoman told ThinkAdvisor in September.
New Wealth Management Target
Of the company's decision to raise its wealth management unit's pretax profit margin goal to 30%-plus, Gorman said the change was driven by growing new assets and the expectation that increasing interest rates would accelerate its results.
Morgan Stanley previously had a 26-30% margin goal and the new target is higher than the full-year margin of 27% the wirehouse reported for 2021, excluding costs associated with its purchase of E-Trade in October 2020 and Eaton Vance in March 2021. Its wealth business reported a margin rate of 25% in 2021 and 23% for 2020, factoring in integration expenses.
"With respect to net new asset growth, [the wealth management business] has gone from very low single digits in the last decade, to 4% to 6% more recently, to unprecedented growth this year," Gorman said on the call.
"We feel great about where we are today and the business' potential," he said. "With the top advisor-led business in the industry, complemented by leading workplace and self-directed offerings, the wealth franchise we have built is a category of one."
Morgan Stanley already serves almost $5 trillion of client assets and overall revenue on assets remains high at over 50 basis points, "underlining this segment as an economic engine for the firm," he said.
