Morgan Stanley crosses long-sought $10T client asset milestone

Morgan Stanley’s wealth management business posted record results in the second quarter, helping push the firm’s combined wealth and investment management assets past $10 trillion — a long-standing strategic milestone for the firm.

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Morgan Stanley said Wednesday its wealth management business brought in a record $148 billion in net new assets during the quarter, up 25% from the first quarter and 150% from a year earlier. (Net new assets measure client inflows excluding market performance and are a key growth indicator.) 

The wealth management business also delivered a record $8.9 billion in revenue in the second quarter, up 14% from this time last year, while fee-based flows totaled $39 billion. 

“The execution of our strategy, particularly our sustained investments in our client acquisition funnel, allowed us to reach more clients and deepen existing relationships,” said Chief Financial Officer Sharon Yeshaya during the July 15 earnings call. 

Crossing the $10T asset threshold

Client assets in the wealth management business reached $8 trillion in the second quarter, pushing Morgan Stanley’s combined wealth and investment management total assets past the $10 trillion mark, a major milestone executives have long targeted. 

“And with the passage of time, we seek to grow stand-alone wealth assets from the current $8 trillion to $10 trillion,” Pick said in the call. 

CEO Ted Pick and Yeshaya both credited strong client acquisition numbers and the firm’s Workplace division — Morgan Stanley at Work, which helps companies administer employee stock compensation plans — as key drivers of the growth.

Stock-plan IPO flows accounted for just over half of the quarter’s new net assets, highlighting the importance of Morgan Stanley at Work in feeding new clients into the broader wealth management business, Yeshaya said. 

READ MORE: Morgan Stanley maintains IPO optimism after positive earnings

Focusing on the client-acquisition funnel and beyond

Morgan Stanley’s ability to win assets from IPO-related stock plans is a differentiator, Yeshaya said, and “is really the bread and butter of the integrated firm.” She said that the firm has relationships with about 70% of “the top 100 unicorns by market cap” — or the most valuable private startups — through its Workplace division pipeline. 

IPOs can serve as a source of new net assets at the top of the client-acquisition funnel, she added. The firm brings in clients through its E-Trade online brokerage or through Morgan Stanley at Work before seeking to convert them into broader wealth management relationships with financial advisors. 

“We’ve spent a lot of time thinking about how do we service some of these companies at the very early stages,” Yeshaya said. “We’ve talked about how we support different private companies, think about equities then, and all of the investments that we’ve made. So that gives you sort of the framework of, really, some of the top of the funnel.”

READ MORE: Morgan Stanley debuts crypto trading, undercuts rivals on price

The big picture

Executives on the earnings call said the firm’s focus is now on retaining those clients and fostering deeper relationships. 

From a wider perspective, total firm revenue was $21.3 billion, up from $16.8 billion a year earlier. The firm’s net income soared 58% to $5.58 billion. 

“Buoyed by active markets, our results reflect multiple years of disciplined investment and consistent execution, positioning the integrated firm to deliver strong results,” Pick said. “Our advice-based businesses are working well together across our leading global investment bank and scaled wealth and asset management franchises to deliver industry-leading growth.”