How Morgan Stanley (MS) Makes Its Money

Morgan Stanley shares a name with JPMorgan Chase & Co. (JPM) and it is not a coincidence. The “Morgan” in Morgan Stanley is J.P. Morgan’s grandson, Henry. The company was founded by Henry S. Morgan, Harold Stanley, and others in 1935.

Morgan Stanley was created as an investment bank, but today, it is considerably more. With offices in 42 countries, Morgan Stanley is a well-known and respected global financial services company that offers a wide range of investment banking, securities, wealth management and investment management services. It serves clients that include corporations, governments, institutions and individuals.

In fact, Morgan Stanley's primary money-making segments are labeled as Institutional Securities, Wealth Management, and Investment Management. In addition, Morgan Stanley's commercial banking operation competes with the likes of Wells Fargo & Co. (WFC), US Bancorp (USB), and other retail outlets.

For fiscal year 2022, the company reported $53.7 billion in net revenues. This was a 10.2% decrease compared to the $59.8 billion in revenues reported the prior year. In addition, the firm repurchased $9.9 billion of outstanding common stock. Morgan Stanley's Board of Directors declared a quarterly dividend per share of $0.775, payable on Feb. 15, 2023.

On April 19, 2023, the company reported net revenues of $14.5 billion for the first quarter of the year, compared with $14.8 billion for the same period a year before. In addition, it reported net income of $3.0 billion for the period, compared to $3.7 billion for the same period of the prior year.

Key Takeaways

  • Morgan Stanley is a leading global investment bank and wealth management firm, employing more than 82,000 people worldwide.
  • The company makes money primarily from three segments called Institutional securities, Wealth Management, and Investment Management.
  • For 2022, Morgan Stanley recorded $53.7 billion in revenues.
  • For the first quarter of 2023, it reported $14.5 billion in revenues.
  • Net income for the first quarter of 2023 was $3.0 billion.

Institutional Securities

Institutional Securities is normally Morgan Stanley’s biggest moneymaker. It had net revenues of $24.4 billion for the challenging 2022 fiscal year.

Institutional Securities' clients are corporations, governments, financial institutions, and high- to ultra-high-net-worth clients. This business segment offers services such as investment banking, sales and trading, corporate lending, and more.

Within Institutional Securities, Morgan Stanley's investment banking department makes money by charging fees on advisory services such as underwriting and mergers and acquisitions. For 2022, investment banking revenues dropped 49% compared to the year before, to approximately $5.24 billion. Advisory revenues totaled $2.94 billion. Equity underwriting totaled $851 million. Fixed income underwriting totaled $1.43 billion.

Globally, Morgan Stanley is consistently highly ranked in mergers and acquisitions and initial public offerings (IPOs). Some of its underwriting includes securities offerings and the syndication of loans. In terms of sales and trading, Morgan Stanley earns a profit by acting as a market maker for customers’ purchases and sales of financial instruments.

"2022 was a strong year for the Firm as our clear strategy and balanced business model enabled us to deliver an ROTCE [Return on Average Tangible Common Shareholder Equity] of 16% despite the complex macro backdrop. Wealth Management provided stability with record revenues and over $310 billion in net new assets, Investment Management benefited from diversification, and within Institutional Securities our Equity and Fixed Income revenues were strong, offset by Investment Banking. Our strong capital position allowed us to repurchase $10 billion of shares this year and we distributed a healthy dividend."

—Morgan Stanley Chairman and CEO, James Gorman

Wealth Management

Morgan Stanley’s Wealth Management segment provides a range of financial services and solutions to individual investors and small to medium-sized businesses/institutions. It involves over 16,000 professionals doing business around the world. The latest available annual report indicates that Morgan Stanley advises about 3.5 million people and holds more than $3.9 trillion in advisor-led client assets.

For its wealth management clientele, Morgan Stanley offers products and services in brokerage and investment advisory, retirement plans, financial and wealth planning services, and more.

Morgan Stanley earns money from fee-based clients by charging a contractual percentage of their assets related to accounts that are generally not driven by asset class.

In 2022, Wealth Management took in net revenues of $24.4 billion (up 1% year-on-year) with a pre-tax margin of 27% in 2022, or 28.4% when integration expenses are included. In addition, the segment added $311 billion in net new assets, a growth of 6% from the beginning of the year.

Investment Management

Investment Management, Morgan Stanley’s smallest department, does most of its work with institutional investors. This includes endowments, government entities, sovereign wealth funds, and insurance companies. 

In 2022, the Investment Management division's net revenues were $5.4 billion, down 14% from the previous year. The firm recorded assets under management of $1.3 trillion."

Net revenues in the Investment Management segment are derived from two areas–Investments and Asset Management. Performance-based income (Investments) for the market-challenged year of 2022 was $43 million, a decrease from $644 million from the previous year.

Asset Management revenues were $5.3 billion, a decrease from $5.57 billion in 2021 and attributed to smaller asset amounts and a consistent market decline.

What Is Morgan Stanley's Net Worth?

Net worth is usually considered to be a company's market capitalization. By that metric, as of May 2023, Morgan Stanley's net worth was approximately $140.90 billion.

How Valuable Is Morgan Stanley?

Morgan Stanley is the 84th most valuable company in the world, as measured by market cap.

Is Morgan Stanley Laying Off Employees?

It's reported that Morgan Stanley plans to lay off 3,000 workers in the second quarter of 2023. This would be in addition to the 2% reduction in the workforce that occurred in December 2022.

The Bottom Line

Morgan Stanley has been a well-known name in the investment community for many decades. Its money-making endeavors focus on its Institutional Securities, Wealth Management, and Investment Management segments. As of December 2022, its total revenues were $53.7 billion and net income was $11.0 billion.

Article Sources
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  2. Morgan Stanley. "Morgan Stanley Fourth Quarter and Full Year 2022 Earnings Results."

  3. Morgan Stanley. "Annual Report to the United States Securities and Exchange Commission."

  4. companiesmarketcap. "Market capitalization of Morgan Stanley (MS)."

  5. Bloomberg. "Morgan Stanley Plans 3,000 More Job Cuts as Dealmaking Slumps."

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