Wirehouses Boost Revenue in Q3
Wirehouses boasted year-over-year revenue increases in the third quarter as the banks broadly beat earnings estimates.
Bank of America, Wells Fargo, and Morgan Stanley released their third-quarter earnings this week, along with other prominent financial services players, including JPMorgan Chase and Goldman Sachs.
In Merrill’s Q3 earnings, the wealth division touted $6.3 billion in revenue and $3.9 billion in asset management fees, up 10% and 12% year-over-year, respectively (the figures include Merrill and BoA’s Private Bank division). The firm boasted about 5,400 net new relationships in Q3, and in Merrill, 79% of them had assets over $500,000.
Additionally, Merrill households with alternative investments have more than doubled in the past five years, with a 12% increase in advisor adoption since the second quarter of 2024.
According to Merrill Co-Head Eric Schimpf, alternatives have been a central focus of the firm’s sports and entertainment division, as many clients and firms are exploring sports franchises as a potential entry into the alts space.
Additionally, Schimpf noted that cryptocurrency offerings for clients were “a quickly evolving space and a quickly changing landscape,” noting the firm already offers some clients the chance to invest in crypto ETFs, and that “it’s something we continue to look at almost daily.”
In February 2024, Merrill and Wells Fargo’s brokerage unit began offering access to ETFs that invest directly in Bitcoin. The products were approved for some wealthy clients with brokerage accounts who requested them (the firms joined Charles Schwab and Robinhood in offering the products shortly after regulatory approval in early 2024).
In a note earlier this April, Bitwise Chief Investment Officer Matt Hougan predicted that all four wirehouses (Merrill, Morgan Stanley, Wells Fargo and UBS) would allow advisors to easily access Bitcoin ETFs (and potentially solicit clients for investment) by the end of 2025.
According to Morgan Stanley earnings, the firm had $8.9 trillion in total client assets across its wealth and investment management businesses (up from $7.7 trillion), inching closer to the wirehouse’s eventual goal of $10 trillion in total assets.
In a call discussing the firm’s third-quarter earnings, Chief Financial Officer Sharon Yeshaya suggested the division’s net interest income could see a “modest sequential gain” in Q4, even if the Federal Reserve continues to lower rates as expected. Additionally, the firm is bringing in assets directly to fee-based flows, not just net new assets.
“So we’re seeing momentum as you have IPOs come to market. People are bringing their assets to Morgan Stanley,” Yeshaya said. “They’re dropping into their self-directed accounts, yes. But they’re also moving it directly into the advisor-led accounts. And that’s been a large part of the story.”
According to Wells Fargo CEO and Chairman Charles Scharf, the firm’s advisor attrition has declined every quarter this year following improvements to its independent platform, which he said has also increased the quality of advisor recruits.
Total revenue for the wirehouse’s wealth and asset management division was up 8% year over year and quarter over quarter, with net interest income up 16% from last year “driven by lower deposit pricing and higher deposit and loan balances.”
Additionally, Chief Financial Officer Michael Santomassimo acknowledged that there was “an opportunity to improve” the firm’s wealth management margins. He argued that the key was to boost the division’s banking and lending business with clients, noting that lending per dollar of assets is “well below” that of their peers. He said the other solution was to improve the productivity of advisors.
“That could be more alternatives products or other tools that we give them to continue to grow their books,” Santomassimo said. “But we do expect to see a margin improvement in that business, and that will contribute to overall returns as we look forward.”
Revenue in Goldman Sachs’ asset and wealth management division jumped 16% from the previous quarter and 17% from the same period last year, due to “higher management and other fees and significantly higher net revenues in private banking and lending,” according to the firm’s Q3 presentation. At JPMorgan, wealth net income was $1.7 billion, and revenue reached $6.1 billion, representing year-over-year increases of 23% and 12%, respectively. As with other firms, the revenue boosts were driven by “strong net inflows and higher average market levels,” as well as increased brokerage activity, according to the firm’s presentation.