Morgan Stanley’s record asset flows drove 25% margin in 2021

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The “freakish” organic growth of Morgan Stanley Wealth Management in 2021 reached a level so high that the firm just can’t maintain it into the future, CEO James Gorman said.

The net new assets flowing into the wirehouse jumped 11% in 2021 to a record $437.8 billion, an amount prompting Gorman to point out in a Jan. 19 call with analysts that “there are a lot of asset management companies that aren’t $400 billion in size.” The percentage difference between Morgan Stanley’s annual organic growth and that of the previous year rose from “the bad days” of negative figures to positive territory starting in 2012 and up to 4% to 6% in the years around its 2020 acquisition of E-Trade, Gorman noted, according to a transcript by Seeking Alpha. The massive amounts of incoming assets in 2021 eclipsed all of them.

“I don’t think that’s sustainable. I mean, God, I’d love it, but I don’t think it’s sustainable. We’re not going back to 3%, 4%. I don’t know if it’s 5, 6, 7, somewhere in that zone. But it’s going to be a very healthy growth rate,” Gorman said, predicting that the company will reach $10 trillion across its wealth and asset management arms from their current level of $6.5 trillion. “We’re in that sort of, I don’t know, 4, 5, 6, 7. And that’s why I deliberately said in the script that it was too early to put a net new money target out there. We needed to see where this really settled.”

To see the key takeaways from the earnings announcement and call, scroll down our slideshow. For coverage of Morgan Stanley’s prior quarterly earnings, click here.

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