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Morgan Stanley Stresses Three Wealth Channels in Q2 Results

'We kind of think we’re creating—and not to be arrogant about it—but a new mousetrap,' said CEO James Gorman. 'You’ve got three legitimate channels pouring assets into the house.'

Morgan Stanley reported $71 billion in net new assets in its wealth management segment in the second quarter, up from about $20 billion in the year-ago quarter but down 32% from the first quarter, at nearly $105 billion. On a conference call with analysts Thursday morning, CEO James Gorman said the growth was reflective of the success of the firm’s three segments within wealth management, which now include an advisor-led channel, direct channel, via its acquisition of E*Trade and a workplace channel.

The firm recently stopped reporting financial advisor head count as part of its quarterly earnings.

The workplace program was created through Morgan Stanley’s acquisition of Solium and the Equity Edge Online business it picked up in its E*Trade transaction.

In a recent exclusive interview with, Brian McDonald, managing director and co-head of Morgan Stanley at Work, described plans for two new features and ongoing integration plans that are expected to be available before the end of the year.

“Every now and then in business, you look and sort of see a wave coming, and you catch the wave and it’s a beautiful thing; the whole workplace space to me is the next major growth area in financial services,” Gorman said on the earnings call. “I really believe that this is fertile ground to convert those millions of clients hopefully into being Morgan Stanley and E*Trade clients as we have the accounts that fold into our own house accounts.”

Year to date, the firm has seen about 9% growth in net new assets in the wealth management segment, which, Gorman said, has been unheard of among the big wirehouse firms. “We’ve never seen this, and I’ve been doing this for a very long time,” he said.

“The wirehouses have sort of struggled and struggled for a couple of reasons: one is poor training, two is very high attrition, three is lack of luring clients in through mortgage and banking products that the banks have, etc.,” Gorman said. “We kind of think we’re creating—and not to be arrogant about it—but a new mousetrap.

“You’ve got three legitimate channels pouring assets into the house.”

Total assets in wealth management are now at around $4.5 trillion, up from about $500 billion 12 to 14 years ago, Gorman said. Advisor-led client assets totaled about $3.6 trillion at the end of the second quarter, up 38% from a year ago.

Wealth management net revenues were about $6 billion for the quarter, up 30% year over year and 2% sequentially. Net income was about $1.3 billion, up 48% year over year and 2% sequentially. Pretax profit margin stayed steady from the first quarter at 27%.

Overall, Morgan Stanley reported net revenues of $14.8 billion for the second quarter, up 8% from a year ago, on net income of $3.5 billion, or $1.85 per share, up 10% from a year ago.

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