For years, a steady stream of financial advisers has left Wall Street wirehouses and regional brokerage firms to open registered investment advisers, where they pocket a larger percentage of the revenue stream and build businesses they can later sell, adding to the incentive.
But Morgan Stanley in 2020 saw that movement tip in the opposite direction, with more advisers joining Morgan Stanley or staying put than jumping to an independent RIA, according to the firm’s CEO 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 its 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.
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 Wednesday morning to discuss fourth quarter earnings with analysts. “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 new assets, said Gorman, pointing to the company’s earnings. Morgan Stanley added $162 billion in net new assets in 2020, or 6% of its total assets. Compared to a year earlier, the company added net new assets, which was in line with recent years of 3% to 4% of its total.
Add in $44 billion net new assets from ETrade, which appeals to younger and online investors, Morgan Stanley net new asset total in 2020 was $206 billion.
For comparison, some online and virtual platforms and competitors have $20 billion in assets in total, he noted. “I read about a lot of these online players that have got $20 billion in total,” he said. “And we’re bringing in $20 billion every five weeks, so we’re effectively creating these companies every five weeks.”
At the end of last year, Morgan Stanley reported $4 trillion in assets on its wealth management platform, including those of the newly acquired ETrade.
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