By Corrie Driebusch
In the horse race to be the biggest retail brokerage on the
Street, Morgan Stanley (MS) looks set to overtake Bank of America
Corp.'s (BAC) Merrill Lynch on a key metric: How much in client
assets it oversees.
As of March 31, client assets at Morgan Stanley Wealth
Management totaled $1.94 trillion. That number is within striking
distance of Merrill Lynch's $1.95 trillion in total client
balances.
Both brokerages reported strong profit in the first quarter of
2014, as they did last year, when a soaring stock market swelled
the balances in most clients' accounts as well as the advisory fees
based on those balances.
But Morgan Stanley appears to have outpaced Merrill Lynch in
terms of new assets flowing into client accounts. During the first
quarter, Morgan Stanley reported $19 billion in net new money in
fee-based accounts, up 24% from a year earlier. Bank of America's
Global Wealth and Investment Management unit, which is mostly
Merrill Lynch, reported a net $17 billion of new "long-term"
assets, a category that primarily consists of fee-based accounts,
down 15% year-over-year.
While the two numbers aren't perfectly comparable, analysts say
they are close enough for their analysis.
"If that trend continues, they (Morgan Stanley) are going to
catch Merrill in the next two quarters" in total client assets,
said Alois Pirker, an analyst who covers the wealth management
industry for Boston-based research firm Aite Group.
A spokeswoman for Merrill Lynch and a spokesman for Morgan
Stanley declined to comment.
Before the 2008-09 financial crisis, Merrill Lynch held the
title as the largest wealth management firm by both client assets
and the number of financial advisers. But Morgan Stanley's ranks of
advisers increased dramatically with its acquisition of Citigroup's
Smith Barney brokerage. That merger began as a joint venture in
2009 and was completed last year.
Morgan Stanley now has more than 16,400 advisers, compared to
Merrill Lynch's roughly 13,700.
But total headcount has become less important at both firms,
which increasingly are focused on average revenue per financial
adviser. By that measure, Merrill Lynch and UBS Wealth Management
Americas are the leaders among the major brokerages, with
per-adviser revenue exceeding $1 million. Morgan Stanley Wealth
Management's productivity lags behind at an annualized $881,000 per
adviser for the first quarter.
Growth in total client assets is significant in that it shows
the ability to bring in new clients or more of the assets of
existing clients. Following the financial crisis, some industry
analysts expected Merrill Lynch to have an advantage in this regard
because of its new access to Bank of America's commercial banking
customers.
According to Mr. Pirker, it isn't yet clear if Merrill Lynch
advisers are seeing significant referrals from the commercial bank.
At least in the last quarter, "Morgan Stanley seems to have done
better" in bringing in new client assets, he said.
Merrill reported nearly $3.8 billion in total revenue for the
three months ended March 31, while Morgan Stanley Wealth Management
reported revenue of $3.6 billion. Both were up year-over-year.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
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