Morgan Stanley Wealth Management a Bright Spot in Earnings, Turnaround Still Underway
Morgan Stanley (NYSE:MS) wealth management accounts for about 20% of the $21.54 Trefis price estimate for Morgan Stanley’s stock, which is around 28% below the current market price. The wealth management division of Morgan Stanley competes with of other banks like Credit Suisse (NYSE:CS), UBS (NYSE:UBS) and Goldman Sachs (NYSE: GS).
The asset management division provides retail investors with a full range of mutual fund and alternative investment products, and institutional clients with a fully integrated asset management offering. On the other hand, wealth management serves the needs of high net-worth individuals as well as institutional investors with full range of financial services.
The total Assets Under Management (AUM) for the wealth management division of Morgan Stanley was $1.5 trillion, for Credit Suisse it was $840 billion and for UBS it was $1.3 trillion in 2009.
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Wealth Management Competitors
The above bar chart compares the change in wealth management assets for UBS, Credit Suisse and Morgan Stanley between 2006 and 3Q 2010. Though strong global economic growth fueled an increase in the assets managed by these firms in 2007, they saw a significant decline in their assets managed in 2008 due to the global financial crisis. However, with global economic environment improving in 2009, these firms have again increase their assets managed largely due to an increase in risk appetite and investment activity by clients, a consequence of returns across most major asset classes improving. Morgan Stanley in particular has been scaling up its wealth management operations, expanding its business significantly and entered into a joint venture with Citi’s Smith Barney, which should help growth this business further.
Profit Margins for Wealth Management The Wealth Management Operating Margin increased from 12% in 2005 to 17% in 2007, as this period saw a growth in demand for wealth management services across the world, thereby increasing the profitability of this division. However, with demand for wealth management services decreasing during the economic slowdown between 2007 and 2009, the Wealth Management Operating Margin decreased to 6% by 2009. Going forward, we expect it to increase to around 15%, by the end of the Trefis forecast period, as demand for wealth management services is expected to pick up as the economic environment improves
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