Morgan Stanley’s wealth management unit drove the firm’s higher than expected earnings on Friday, posting solid revenue and profit gains while significantly increasing its advisor force.
The Wall Street investment bank reported $7.9 billion in net revenues for the third quarter, handily beating analysts’ estimates of $7.7 billion. The bank also ended the quarter a net income of $888 million, compared with a loss of $1.01 billion a year earlier.
Morgan Stanley’s wealth management division reported $3.48 billion in net revenues, a small drop from the second quarter, but up from the $3.22 billion reported at the same time last year. The unit’s profitability is also steadily rising, with Morgan Stanley reporting a pre-tax profit of $430 million in the third quarter.
And despite reports of heavy advisor departures, Morgan Stanley actually increased its headcount in the third quarter. The firm has grown its advisor force by 250 since June and by 139 advisors since last year at this time. But revenue per advisor took a small hit, declining from the $866,000 high in June to $848,000 per advisor on Friday.
Morgan Stanley’s client assets under management continued to increase overall, up to $1.83 trillion, a 3 percent increase from the $1.78 trillion reported in June and an 8 percent increase from the $1.69 billion reported in September 2012.
Client assets in fee-based accounts—which now make up 36 percent of total assets—also saw gains, growing from $536 billion last year to $652 billion in the third quarter. Fee-based asset flows doubled from the second to third quarter, up 15 billion from the $10 billion reported last quarter.
Morgan Stanley’s wealth management gains come after finally completing its merger with Smith Barney. The firm bought out Citigroup’s remaining 35 percent stake at the end of June.