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How Morgan Stanley is Beating Goldman Sachs

July 26, 2017

Morgan Stanley’s emphasis on wealth management and going after the mass affluent is helping the firm catch up with its arch-rival Goldman Sachs as Wall Street’s top dog, Investopedia writes.

Goldman’s market value was $50 billion higher than Morgan Stanley’s in 2009 but that difference has since narrowed to less than $6 billion, the financial terms website writes. Part of it is due to better risk management at Morgan Stanley when it comes to its trading business, Investopedia writes. But to a large degree Morgan Stanley’s recent gains over its rival are due to an increased focus on wealth management — particularly after the company’s purchase of Citigroup’s Smith Barney brokerage in 2009, according to the website.

Wealth management provides a more stable source of revenue compared to the volatile returns of investment banking and trading, which are still the core lines of business at Goldman Sachs, Investopedia writes.

Morgan Stanley’s 15,777 financial advisors now oversee $2.2 trillion in client assets, according to the firm’s second-quarter earnings report.

When combined with the assets held in its asset management division, Morgan Stanley manages $2.674 trillion, Investopedia writes.

Together, the two units delivered 49% of Morgan Stanley’s total revenue and 42% of its profits in the first six months of 2017. At Goldman Sachs’ investment management segment, which combines wealth management and asset management, client assets stand at just $1.41 trillion, according to the firm’s second-quarter earnings report cited by the website.

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The company’s investment management division made up just 19% of the company’s total revenue, Investopedia writes.

What’s more, Morgan Stanley’s profit margin on its wealth management and asset management assets is twice as large as Goldman Sachs’, Investopedia writes. That’s due to Morgan Stanley’s decision to go after mass affluent clients while its rival still focuses on “price-sensitive” high net worth and institutional clients, the website writes.

By Alex Padalka
  • To read the Investopedia article cited in this story, click here.