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Morgan Stanley on the hunt for 1 million new clients

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James Gorman is marking a decade as CEO of Morgan Stanley by laying down bold growth targets for the wirehouse.

The latest? Onboarding one million new clients in the next five to seven years.

Morgan Stanley says it’s doable thanks to its acquisition of stock plan administrator Solium and the firm’s existing workplace financial wellness and retirement offerings.

The wirehouse currently services 2.7 million stock plan participants and estimates that those participants hold about $1.5 trillion in wealth away from the company.

“There is clearly room to grow here,” Gorman said during an earnings call Thursday, billing the ambitious goal as a “new chapter” in Morgan Stanley’s strategy.

The hoped for one million new clients would be served by the firm’s approximately 15,500 financial advisors and its expanding array of digital wealth management offerings, Gorman said.

Like some of its competitors, Morgan Stanley has invested heavily in its technology platform, adding a robo advisor and other services.

Gorman, who joined Morgan Stanley in 2006 and has served as CEO since January 2010, also outlined plans to boost Morgan Stanley Wealth Management’s pretax profit margin to above 30%. It currently stands at 25% for the fourth quarter, according to the company’s recent earnings report.

The wirehouse raised grid thresholds for its 2020 advisor compensation plan, prompting one analyst to ask Gorman if the company would consider more changes to advisor pay to boost profit margins.

The CEO challenged the premise of the question.

“We’re not using the grid to drive margins. We use the grid to drive behavior, to do a better job for clients,” Gorman said.

“I don’t think of the grid as an expense item,” he added.

The firm’s wealth management business, which executives characterized as a key growth engine, generated $4.6 billion in net revenue for the fourth quarter, up 11% from the year-ago period.

Net income jumped 16% to reach $889 million. Client assets topped $2.7 trillion, a 17% year-over-year increase, even as the firm reported having fewer financial advisors. Headcount ticked down to 15,468 from 15,694, representing a 1% year-over-year decline.

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