Review of Morgan Stanley Wealth Management

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Updated on Tuesday, April 28, 2020

Financial services behemoth Morgan Stanley offers an extensive list of services to individuals, families, businesses and institutions through the firm’s wealth management division, Morgan Stanley Wealth Management. The firm has a team of 15,000 advisors and researchers on staff and more than $904 billion in assets under management (AUM). It is headquartered north of New York City in Purchase, N.Y., but it serves clients around the country and the world.

All information included in this profile is accurate as of April 28, 2020. For more information, please consult Morgan Stanley Wealth Management’s website.

Assets under management: $904,300,848,179
Minimum investment: Typically $10,000 for an account with a financial advisor; $250,000 to $5 million or more for certain managers
Fee structure: A percentage of AUM for portfolio management; fixed fees for financial planning; commissions
Headquarters:200 Westchester Avenue
Purchase, New York 10577
(914) 225-5510
https://www.morganstanley.com/what-we-do/wealth-management

Overview of Morgan Stanley Wealth Management

Morgan Stanley Wealth Management is one of the largest financial services firms in the country, managing more than $904 billion in assets (AUM). The firm has locations in every state as well as Washington, D.C., with more than 700 offices in total.

It operates as both an investment advisor and a broker-dealer, allowing clients to pay a flat fee per account or to pay per transaction. The team consists of about 26,000 members, with 22,200 acting as representatives of broker-dealers and 15,000 also performing investment advisory and research functions. Many of those advisors originally worked for Citi’s Smith Barney but came aboard after the 2009 merger of Morgan Stanley’s Global Wealth Management with Citi’s Smith Barney. The division is also known as Morgan Stanley Smith Barney LLC.

Today, the division is fully owned by Morgan Stanley, a publicly traded firm that formally opened its doors at 2 Wall Street in 1935. Along with its bread-and-butter financial planning and investing services, the firm has resources dedicated specifically to assisting ultrahigh net worth individuals and families.

Which types of clients does Morgan Stanley Wealth Management serve?

Morgan Stanley Wealth Management’s list of clients includes a broad mix of individuals as well as institutions. The team provides services to many middle-income investors as well as high net worth individuals and families, defined by the SEC as having an account of at least $750,000 or a net worth of more than $1.5 million. In particular, the team focuses on serving executives, entrepreneurs and other professionals living outside the United States, as well as sports and entertainment stars.

The unit also serves pension or profit-sharing plans, banking or thrift institutions, charitable organizations, state and municipal governments, insurance companies, corporations and other businesses. Additionally, the team helps employers with the financial benefits they offer workers.

The required minimum investment varies widely by account. A digital advisory product known as Morgan Stanley Access Investing requires as little as $5,000 to start investing. Most financial advisors require a minimum of $10,000 to manage a client’s portfolio. To access specific outside managers, clients need to put up a lot more, anywhere from $250,000 to $5 million or more, depending on the manager.

Services offered by Morgan Stanley Wealth Management

Investment management: Morgan Stanley Wealth Management offers an extensive lineup of options to manage portfolios, each targeting a slightly different need or audience. Whether clients are just starting out, are already sophisticated investors, want to oversee their account or take a hands-off approach, or are interested in third-party managers or not, the firm has a suitable account option.

Financial planning: The firm also offers a la carte financial planning, including services targeting retirement, education and insurance planning. Clients can buy a one-time written plan, or get ongoing planning and monitoring complete with a new financial plan at least every 36 months.

Wealth management: The Private Wealth Management division helps ultrahigh net worth families manage all aspects of their financial lives, including legacy and estate planning, philanthropy and family office services.

Digital advisory program: In the digital advisory program, known as Morgan Stanley Access Investing, clients invest in one or more model strategies managed by the firm. The team has created a proprietary algorithm to recommend an investment strategy, based on client answers to an investment questionnaire. The strategies typically consist of mutual funds and ETFs. Clients can add a tilt toward specific social or thematic issues. To participate in the program, clients must agree to electronic communication.

Here is a complete list of services offered by Morgan Stanley Wealth Management:

  • Investment advisory services/portfolio management (separately managed and wrap fee accounts; discretionary and non-discretionary management)
  • Financial planning services
    • Retirement planning
    • Trust and estate planning
    • Charitable planning
    • Education planning
    • Business planning
    • Tax planning and management
    • Cash flow forecasting
    • Spending analysis and budgeting
    • Long-term care planning
    • Insurance/risk management
  • Pension consulting services
  • Educational seminars and workshops

Separately, through its broker-dealer licensing, the team also places individual trades and is paid per trade. Clients should consider if they are better off using the firm’s registered advisory services and paying a flat advisory fee, or if they would rather use the broker-dealer services and pay per transaction.

Morgan Stanley also has other divisions that operate in nearly every other major category of the financial industry, including investment banking and capital markets; sales and trading; and research and investment management.

How Morgan Stanley Wealth Management invests your money

Morgan Stanley Wealth Management’s investment approach varies based on each client’s preferences. Clients can elect for a financial advisor to manage their portfolio on a discretionary basis, meaning the advisor can buy and sell without the client’s express permission. In that case, the advisor may create a custom portfolio of mutual funds, exchange-traded funds, individual equities, debt, cash options and other products, based on the client’s financial situation and investment objectives. The exact recommendations will vary by advisor, according to their own personal preferences and styles, though they must stay within investment guidelines set by the firm.

Clients can also choose to have their financial advisors recommend a specific manager who will oversee the client’s money, or a specific strategy, including single- and multistrategy options. The firm also offers consulting services for clients looking for advice but who prefer a non-discretionary relationship in which they manage their money themselves.

For those interested in environmental, social or thematic investing, the firm has established an Institute for Sustainable Investing. This allows investors to put their money to work in a way that has a positive environmental or social impact, or that reflects their personal values, such as gender diversity.

Fees Morgan Stanley Wealth Management charges for its advisory services

Portfolio management fees

Fees for portfolio management services vary by advisor and account type, and are negotiable. The firm does specify, however, that the maximum annual asset-based fee typically allowed to go to Morgan Stanley is 2%.

Keep in mind that clients who work with an advisor as well as additional managers will owe extra management fees, adding up to another 0.75% onto their annual rate. The fee typically covers management, transaction and custody costs. Separately, clients are responsible for internal mutual fund fees. They will also owe transaction fees when a firm other than Morgan Stanley executes trades for their portfolio.

Fees are typically paid in advance, usually on a monthly or quarterly basis.

Financial planning fees

One-time plan: For financial planning services, clients pay a maximum fixed fee of up to $5,000 for a one-time plan (although the fee may run as high as $10,000 if the plan covers more than $5 million in assets and the advisor has a specific educational designation, such as a CFA or CFP).

Ongoing advice: If clients want ongoing monitoring and advice through what’s dubbed the LifeView Connect program, they will pay a fixed fee ranging from $250 up to $25,000 per year, depending on the amount invested.

Morgan Stanley Wealth Management’s highlights

  • An extensive lineup of choices: Morgan Stanley Wealth Management’s menu of options is one of the broadest in the industry. Want to be hands off? Check. Make every trading decision yourself? Check. Stick to mutual funds and ETFs? Check. Add individual stocks and bonds or even alternatives investments, such as private equity, hedge funds and funds of funds? Check, check, check. The firm also offers the choice among a custom strategy, a model portfolio, a third-party manager, a separately managed account and a digital tool. With this breadth of options, most clients will find what they’re looking for here.
  • Access to a digital advisory program: Investors starting out or trying to reach specific goals, such as paying for college or saving for a down payment for a new home, may look to the digital advisory tool. They only need $5,000 to get going, and can invest in model portfolios for a 0.35% annual fee.
  • Services for extremely wealthy clients: Through the Private Wealth Management team, ultrahigh net worth clients can find family office services, private banking and other assistance, such as help with philanthropy; estate planning and wealth transfer; loans; business and succession planning; and more.
  • Environmental, social, and thematic investment options: Clients specifically interested in investing in an issue close to their heart, such as climate action, gender diversity, robotics and data and more, have that option at Morgan Stanley Wealth Management. On the flip side, clients also have the ability to intentionally avoid certain investments that generate revenue from objectionable activities.
  • Awards and accolades: Morgan Stanley Wealth Management’s team has ranked highly in numerous industry rankings, including dominating the top of the most recent list of best financial advisors by Barron’s in 2019. The firm has also won accolades for its digital tools and impact investment options.

Morgan Stanley Wealth Management’s downsides

  • No standardized fee schedules: Since the firm does not publish a fee schedule, and rates can vary by advisor, clients cannot find out how much they’re likely to pay in fees without meeting with each potential advisor. This may make it challenging to compare rates when you’re shopping around for a financial advisor. Additionally, if an advisor charges the maximum allowed 2%, that’s at the high end of the fee spectrum in comparison with the average total fee in the industry of 1.17%, according to RIA in a Box. Keep in mind that fees are typically negotiable with Morgan Stanley, though.
  • Potential conflicts of interest: The firm earns compensation from certain funds and products, such as annuities, that its advisors sell. This creates potential conflicts of interest, as advisors may be financially incentivized to recommend these products.
  • Not every advisor can offer every service: Only certain advisors that meet specific requirements are allowed to directly manage a client’s portfolio. Thus, clients will need to check with an advisor if they’re interested in that service.
  • Pays for referrals: The firm compensates affiliated and unaffiliated third parties for sending clients its way. Thus, clients should always ask why someone is recommending the firm’s services.
  • Disciplinary disclosures: The large firm has hundreds of disciplinary disclosures. See more below.

Morgan Stanley Wealth Management disciplinary disclosures

The Securities and Exchange Commission (SEC) requires all registered investment advisors to disclose on their Form ADV whenever the firm, an employee or an affiliate faces disciplinary action, such as criminal charges or civil lawsuits, that are material to a client’s evaluation of the advisory business or the integrity of the management team. Morgan Stanley Wealth Management, as well as its predecessor firms, have disclosed many regulatory items in the last 10 years, largely stemming from the SEC. Many items were settled without admitting or denying the accusations. The firm discloses no criminal actions.

Here are some of the more notable instances among the firm’s list of disclosures:

  • In 2018, the firm paid a civil penalty of $3.6 million, without admitting or denying the findings, to settle allegations that it did not implement policies reasonably designed to prevent personnel from misappropriating assets in client accounts, after a financial advisor initiated unauthorized transactions in four accounts. The firm fully repaid the affected clients.
  • In 2017, the firm paid an $8 million penalty to settle allegations that it solicited approximately 600 non-discretionary accounts to purchase specific single inverse exchange-traded funds without, among other things, properly disclosing the features and risks.
  • In 2017, the firm paid a civil penalty of $13 million to settle allegations, without admitting or denying the findings, that it inadvertently charged advisory fees in excess of what it disclosed and agreed to with certain clients, among other issues.
  • In 2016, the firm paid a civil penalty of $1 million, without admitting or denying the findings, to settle allegations that it failed to prevent an employee from misappropriating customer account information despite having written procedures in place to protect customer records, because those policies were not adequate enough.

Morgan Stanley Wealth Management onboarding process

Clients can search for an advisor or for a branch location by using the search tool on the firm’s website. Before clients formally start working with an advisor, they’ll need to sign an agreement that lists the specific services being offered and the price. Clients may also need to separately establish a relationship with an outside manager, since sometimes they’ll pay that manager separately from Morgan Stanley.

Once the relationship is underway, the frequency at which clients will hear from their advisor or team will vary, but most clients receive at least quarterly performance reports. In certain cases, such as when an advisor has recommended outside managers, the advisor should touch base annually to make sure the client’s investment criteria has not changed.

Is Morgan Stanley Wealth Management right for you?

Morgan Stanley Wealth Management offers something for everyone. The firm’s large national presence means clients in every state can consider the firm. Ultrahigh net worth investors and anyone with complicated needs will find additional services, such as insurance and estate planning, family office services, access to alternative investments and private banking. On the other hand, investors who are just starting out or have straightforward goals can look to the low-cost Morgan Stanley Access Investing program for portfolio management. All types of investors can tap the firm’s a la carte financial planning services for help reaching a specific goal.

Remember it’s up to clients to negotiate fees with each individual advisor, since no standardized firm-wide fee schedule exists. Thus, clients who prefer to know how much they’ll pay upfront, without needing to shop various advisors, may want to look elsewhere, as will clients who learn their fees are close to the firm’s maximum rate of 2%.