Rising Market Risk Drives Wealth Management Windfalls for Morgan Stanley, BofA

Call it the Rumplestiltskin effect: Upbeat earnings reports from the biggest US banks this week have been powered by their trading desks, which lately have become virtual sewing machines spinning gold from market volatility.

Another part of the finance business, wealth management, has thrived for similar reasons. Showcasing just how much on Wednesday were Morgan Stanley and Bank of America, the latest big lenders to beat expectations in a week that has signaled Wall Street, despite all of today’s economic noise, is right as rain.

In Good Wealth

Affluent clients, after all, are more likely to seek professional counsel on asset allocation, tax planning and capital preservation when markets, writ large, grow riskier. Bank of America’s Global Wealth and Investment Management unit, which includes Merrill Lynch, confirmed as much on Wednesday. Revenue at the unit grew 12% year-over-year to $6.7 billion in the first quarter. Client balances hit $4.6 trillion, a 10% annual increase. And BofA boasted of an influx of affluent new customers: 4,000 households with investible assets of $500,000 or more.

Revenue at Morgan Stanley’s wealth business grew at an even faster pace, rising 16% to $8.5 billion. Net new assets surged 26% from a year earlier to $118 billion. It’s a payoff from years of work buttressing the wealth management business:

• In 2020, the bank bought the brokerage and trading platform E-Trade, adding millions of client relationships and hundreds of billions in retail client assets. A year earlier, it acquired workplace stock plan administration business Solium.
• In January, CEO Ted Pick completed the first acquisition of his leadership with the takeover of EquityZen, which lets clients buy pre-IPO shares in private, high-growth companies. Long before all of this, the current iteration of the wealth management division was born out of the acquisition of Smith Barney from Citigroup in the wake of the financial crisis.

Private Credit Where Due: While acknowledging the growing asset class is “having a learning moment,” Pick said private credit, which has come under scrutiny in recent weeks, “is going to broadly perform when the economy is in the kind of good shape it’s in right now.”