Morgan Stanley's Stock Trading Revenue Jumps 41% as Wealth Management Hits a Record

Busy stock markets and a flood of money into financial advisers lifted the Wall Street firm's results, even as its shares fell with the market.

Morgan Stanley reported its third-quarter results on Wednesday, Oct. 14, and the numbers showed how much activity is flowing through the stock market right now. The firm's revenue from stock trading jumped 41%, and its wealth management business, which serves individual investors through financial advisers, set a record. Morgan Stanley beat analysts' expectations, though its shares still slipped as the broader market fell on hot inflation data.

The headline numbers

Morgan Stanley's net revenues were $20.3 billion for the quarter, up from $18.2 billion a year earlier. Net income was $4.9 billion, or $3.03 per share, compared with $2.80 a year ago. Return on tangible common equity, a measure of how much profit a bank earns on its shareholders' money, was 22.6%, a strong level for a large bank.

CEO Ted Pick called it "another strong quarter" and noted that total client assets across its wealth and investment management businesses reached $10.5 trillion.

Trading boomed, especially stocks

Morgan Stanley's Institutional Securities division, which serves big investors and companies, brought in $10.0 billion. The standout was the equity business, which handles stock trading for hedge funds and other large investors. It earned $5.8 billion, up 41% from $4.1 billion a year earlier.

Busy markets drive that business. When prices swing and investors reposition, trading desks earn more. Fixed income, which covers bonds, currencies and commodities, fell 7% to $2.0 billion, while investment banking, which includes advising on mergers and helping companies raise money, rose 2% to $2.2 billion.

Wealth management set a record

The part of Morgan Stanley most connected to everyday investors is wealth management, which includes its financial advisers and the E*Trade brokerage it bought in 2020. That unit had record net revenues of $9.1 billion, up 10%. Clients brought in $232.4 billion of net new assets, meaning new money that came into accounts minus money that left.

That kind of inflow shows that many households are putting more money to work in the markets, whether through advisers or self-directed brokerage accounts. The firm's investment management business, which runs funds, had revenue of $1.5 billion, down from $1.7 billion.

What this means for your wallet

Strong results at big brokerages are a sign that investors are very active. That can be a good moment to look at your own habits. Frequent trading in a hot market can lead to buying high and selling low, and trading costs and taxes can add up. Many long-term investors stick to a simple plan, such as regular contributions to diversified funds, rather than reacting to every market move.

If you work with a financial adviser, it's worth knowing how they are paid. Fee-based accounts, which charge a percentage of your assets each year, are a growing part of firms like Morgan Stanley. Small differences in fees can make a big difference over decades, so ask what you pay in total.

If you prefer to invest on your own, low-cost brokerage apps make it easy to buy index funds or individual stocks. Whatever you choose, keep an emergency fund separate from money you invest, so a market drop never forces you to sell at a bad time.

This article is for education only and is not financial advice. Everyone's situation is different.