For years, a steady stream of financial advisers has left Wall Street wirehouses and regional brokerage firms to open registered investment advice (RIA) firms in the US, where they pocket a larger percentage of the revenue stream, and build businesses they can later sell, adding to the incentive.
But in 2020, Morgan Stanley saw that movement tip in the opposite direction, with more advisers joining the company or staying put rather than jumping to an independent RIA, according to chief executive James Gorman.
Like some of its competitors, Morgan Stanley said a few years ago it was going to cut back in recruiting advisers, which is expensive.
But in 2020, it used recruiting from competitors and the purchase of ETrade Financial to increase its headcount to 15,950 at the end of last year, a net addition of 482, or 3.1%, above its prior year total.
Trend inversion
Gorman, who worked at Merrill Lynch before joining Morgan Stanley in 2006, said that 2020 was the first time in decades he had not seen “net attrition”, or a net loss, of advisers.
“For the first time in the 20-plus years I’ve been doing this, we’re not in net attrition, which is interesting due to the fact that the [independent financial adviser] channels are growing, but they are not growing from us,” he said during a conference call attended by our sister publication Investment News.
“We’re keeping assets from advisers, we’re gaining assets of new advisers.”
And those advisers were able to bring in a substantial amount of net assets, said Gorman pointing to the company’s earnings.
Results
Morgan Stanley added $162bn (£118bn, €133bn) in net new assets in 2020, or 6% of its total assets.
Add in $44bn net new assets from ETrade, which appeals to younger and online investors, Morgan Stanley net new asset total in 2020 was $206bn.
For comparison, some online and virtual platforms and competitors have $20bn in total assets, Gorman noted.
“I read about a lot of these online players that have got $20bn in total,” he said. “And we’re bringing in $20bn every five weeks, so we’re effectively creating these companies every five weeks.”
At the end of last year, Morgan Stanley reported $4trn in assets on its wealth management platform, including those of the newly acquired ETrade.
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