Morgan Stanley pulled in new assets at a healthy pace in the first three months of 2025. But company executives were reluctant to speculate about what current market turmoil will mean for the firm in coming quarters.
Morgan Stanley reported Friday that its wealth management division had $93.8 billion in net new assets in its first quarter, a figure virtually unchanged from a year ago but up 66% from the fourth quarter of 2024. Despite the inflows, the wealth unit’s asset tally fell slightly — by 3% from the end of last year— to just over $6 trillion.
Like most wealth management firms, Morgan Stanley’s AUM totals have been buoyed by strong stock market gains in the past two years. The bull run’s prospects have dimmed in recent weeks, though, amid the Trump administration’s on-again, off-again imposition of tariffs.
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The S&P 500 fell steeply at the beginning of the week only to rally by 9.5% on Wednesday after President Donald Trump announced a 90-day pause on duty hikes previously planned for many countries’ imports. But the index then whipsawed down 3.5% on Thursday as investors came to terms with the fact that a tariff set at 145% would remain in place on Chinese goods.
Can Morgan Stanley keep it up?
In Morgan Stanley’s call with analysts on Friday, Steven Chubak of Wolfe Research said the firm’s net new asset inflows were “certainly more durable than we and others anticipated.” He also noted, though, that markets had only fallen slightly toward the end of the first quarter and that much of the real deterioration happened in April.
“So I was hoping you could speak to the durability of the [net new asset] strength, just given some of the negative marks we’ve seen in both fixed income and equities,” he said.
Morgan Stanley Chief Financial Sharon Yeshaya expressed confidence in the firm’s ability to continue bringing in assets through advisor recruiting and self-directed accounts offered through its online E-Trade brokerage and similar services. Later in the call, Yeshaya said Morgan Stanley advisors actually saw a big increase in the number of clients who were reaching out to them.
“So that just shows you there’s a lot of engagement on both sides,” Yeshaya said. “The volumes from that advisor side over the last two weeks have been up 50% to 100% larger than over the volumes for the last 30 trading days.”
Advisor-led accounts, E-Trade and Morgan Stanley at Work
Of the just over $6 trillion Morgan Stanley was managing at the end of the first quarter, $4.7 trillion was in accounts managed by advisors. That figure was up 10% year over year.
About half of those advisor-managed assets were in fee-generating accounts, which benefited from $29.8 billion in inflows in the quarter. Yeshaya told analysts Friday that “fee-based flows in the quarter were again supported by assets migrating from advisor-led brokerage accounts to fee-based accounts.”
Fee-generating assets are particularly coveted in wealth management because of their ability to produce steady revenue over time. Traditional brokerage accounts, by contrast, tend to generate money only when clients use them to make transactions.
Looking beyond advisor-managed accounts, Morgan Stanley reported that assets managed in self-directed accounts offered through services such as its E-Trade online brokerage rose by 8% year over year to nearly $1.3 trillion. The firm reported the number of households with self-directed accounts rose slightly — 2% year over year — to 8.3 million.
Meanwhile the firm’s Morgan Stanley at Work unit, which helps firms manage equity compensation plans and provides related services, saw its asset tally fall by 6% to $431 million. The firm saw the number of participants in stock plans offered through its workplace unit rise by 2% year over year to 6.7 million.
Morgan Stanley has long touted the corporate relationships forged through Morgan Stanley at Work as a means of bringing in new wealth management clients. Yeshaya told analysts Friday that the workplace channel drew an additional $20 billion in assets into advisor-managed accounts in the quarter and that $300 billion has come over that way since 2020.
Recruiting not likely to see headwinds
CEO Ted Pick said he doesn’t think the market’s ups and downs will impede Morgan Stanley’s ability to recruit and retain advisors. He said wealth head Jed Finn and his fellow wealth executive Vince Lumia continue to get “a lot of inbound inquiry, and we would expect that to continue.”
Morgan Stanley’s appeal, he said, “is about the financial advisor and the financial advisor seeing the integrated firm for what it is, which is we can offer unique access to intellectual capital, world-class technology, compensation that is viewed to be fair and motivating.”
Asset tally and the bottom line
With the assets in its wealth management unit combined with those in investment management, Morgan Stanley reported $7.7 trillion in total AUM. That number was up from $7 trillion a year ago but down from $7.9 trillion at the end of 2024. Morgan Stanley has long had a goal of eventually bringing that tally to $10 trillion.
Still, the wealth management division showed strong revenue and profit results. Its net revenue was up 6% year over year to $7.3 billion and net income up 9% to $1.5 billion.
The division’s noninterest expenses were up 5% to $5.3 billion, including nearly $4 billion in compensation and benefits. The firm reduced its headcount by about 2,000 in a bid to hold down these sorts of costs, but did not include financial advisors in its layoffs.
The wealth division’s pre-tax margin — the percentage of its revenue left over after expenses besides taxes are subtracted — rose slightly year over year from 26% to 27% in the first quarter. Morgan Stanley executives have said they eventually want to have that figure up to 30%, but not at the expense of making reinvestments in the firm.
Reasons to stay upbeat
Despite the current tumult in the markets, Yeshaya gave analysts several reasons for optimism for the year ahead.
“Clients continue to entrust us with more of their assets, reinforcing the value they place on advice,” she said. “Advisor recruitment remains strong, reflecting our reputation as an exceptional place where financial advisers can grow their businesses. Looking towards the year ahead, uncertainty has increased the value of advice and our diversified capabilities.”
