Morgan Stanley released its first quarter 2021 earnings on Friday morning, reporting $105 billion in net new asset flows in the wealth management division, up 183% from the year-ago quarter and its best ever quarterly flows. Chief Financial Officer Jon Pruzan attributed the flows to a combination of new clients, asset consolidation from existing clients and stock plan retention. Fee-based asset flows were a record $37 billion, up 54% sequentially and 102% from a year ago.
The division saw record net revenues of $6 billion during the quarter, up 5% sequentially and 47% from the year-ago period, and record profit before taxes of $1.6 billion, up 50% sequentially and 52% from the first quarter 2020.
Total client assets reached a record $4.2 trillion, up 6% from the fourth quarter 2020 and up 77% year over year. Financial advisor client assets were $3.4 trillion, up 44% from a year ago.
The firm no longer reports financial advisor head count, but Pruzan said it had strong net recruiting and retention during the quarter, which also benefited net new assets.
The wealth management division also benefited from the firm’s acquisition of E*Trade, which closed last year, although Chairman and CEO James Gorman said E*Trade wasn’t the only driver of growth.
“This quarter’s reflective of a very different view of wealth management,” Gorman said on an earnings conference call. “Number one, we needed to have a compelling direct channel; we have that through E*Trade. Number two, we needed to have a compelling workplace platform; we have that through Solium and E*Trade. Number three, we needed to have net positive FA growth in terms of recruiting, not in just number of bodies but actual people who are bringing in assets, and we’re doing that. And number four, you need a compelling platform of ideas, which link to our institutional business and the quality research and product. You’re just operating at a different level.”
Pruzan said the firm’s FA recruiting efforts are accelerating, with bigger teams joining, and advisor attrition has slowed. He said the firm is also investing in the wealth management platform and is in the process of gathering data and running pilot programs.
For instance, the firm is currently running pilots around lead generation, and it’s currently identifying which FAs will participate in that. The firm is looking at data analytics and scoring models and making investments in the engine that will help match an FA to the client based on specific needs.
He added that advisors are experiencing some early signs of the benefits of the E*Trade acquisition, with FAs capturing some of the traditional E*Trade clients who might have previously left that platform for advice.
Overall, Morgan Stanley reported net revenues of $15.7 billion in the first quarter, up 61% from a year ago. Net income was $4.1 billion, or $2.19 a share, during the quarter, up 143% from the first quarter 2020. Those comparisons were impacted by the firm’s acquisitions of Eaton Vance and E*Trade.