Wealth management has emerged as a beacon of profit for the private banking industry as leading wirehouses on Wall Street topped off a profitable year.
Morgan Stanley, Wells Fargo and Bank of America Merrill Lynch have all reported top quarterly earnings bolstered by strong income from their wealth management units.
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With regulators reining in risky portfolios, return on equity has become a growing challenge for many banks and wealth management is seen as a way to restore fortunes.
The bullish wealth market has allowed Morgan Stanley to take top spot. The bank completed the purchase of a brokerage joint venture with Citigroup Smith Barney mid last year. This has boosted its wealth management workforce to 16, 456 advisers – the largest in the industry.
Morgan Stanley’s efforts to shift its focus to wealth management in 2009 is paying off as the unit reported a 78% rise for net income to $476m, raising revenue by 12% to a record $3.7bn. Net income for Morgan Stanley, however, fell by nearly 70% to $181m, from $594m a year earlier.
Pre-tax margin for the wealth management unit was 18% this year and Morgan Stanley has laid out aggressive plans to further boost its results. The firm has raised its target to 22% – 25% by end of 2015.
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By GlobalDataFee-based accounts have been one of the drivers for the success of many brokerages as they comprise a growing proportion of asset flows for the year.
Morgan Stanley, Merrill Lynch and Wells Fargo Advisors have long shifted their focus to advisory services as it continues to gain prominence in their overall earnings picture.
For Morgan Stanley, fee-based assets surged 37% to a record high of $51.9bn for the year.
Rival Bank of America Merrill Lynch Global Wealth Management saw its assets flows jumped by 84% to $48bn from $26bn a year earlier. Among which, 44% of its advisers managed at least half of the assets under a fee-based model, the firm said in December last year.
Similarly, managed-account assets for Wells Fargo Advisors grew 23% to $375bn from $304bn, accounting almost a third of total managed assets valued at $1.4tn.
With wealth management groups boosting banks’ earnings, many large players are now ramping up efforts to expand their units and change their business model to attract affluent clients.
