For banks, the last couple of years have brought significant challenges due to higher rates. For Main Street banks, they are forced to pay higher rates on deposits, while they have made loans at much lower rates. Wall Street banks are facing an environment where IPOs, M&A activity, and corporate issues are at low levels, in part due to the Fed’s hawkish stance according to a Bloomberg article by Sridhar Natarajan.

However, one area of growth for Wall Street-centric banks has been in wealth management. For Morgan Stanley, its wealth management division produced $6.6 billion in pretax profits in 2022. However, it recently set a goal of $12 billion in pretax profits for its wealth management division in the coming years. 

It sees growth in the division coming from more assets, an increase in lending, and markets growing in size. It also is targeting $1 trillion in net new assets over the next 3 years. 

For the full year, it’s expected to earn $10.8 billion in net income which is a drop from $11.4 billion last year. Most of the decline is due to investment banking fees which are projected to be about 40% of their 2021 levels. 

Finsum: Morgan Stanley is projecting that its wealth management’s pretax profits will nearly double over the coming years with asset growth a key driver. 

In an article for ETFTrends, James Comois discusses how direct indexing can lead to increased customization of portfolios which isn’t possible to the same extent as with ETFs and mutual funds. However, it’s important to note that the primary benefits of index investing are retained with direct indexing as it comes with lower costs and diversification.

The major differentiation is that investors own the actual components of the index in their portfolio in order to replicate its performance. At one time this would be too unwieldy for the vast majority of investors, however direct indexing is increasingly available to all investors due to technology which makes its implementation and management simple for any advisor.

In addition to tax benefits, another major positive is that it can result in increased customization of portfolios. For instance, an investor can track the S&P 500 but negate stocks or sectors that they would like to avoid. Many investors are not comfortable holding stocks that are related to gambling or tobacco, while others are unwilling to invest in fossil fuel companies. However, the index can still be tracked as these stocks are replaced with other stocks that have similar factor scores. 

Finsum: Direct indexing is growing in popularity due to the increased flexibility and customization it allows for investors while retaining the benefits of index investing..

A robust pipeline of prospects is essential for the long-term growth of a successful financial advisor practice, however the major challenge is that it takes consistent investment of time and energy that won’t yield immediate results. In an article for SmartAsset, Rebecca Lake CEFP laid out some tips on building a strong pipeline.

The first step is to understand that there are multiple paths to successful prospecting. So when coming up with a strategy, figure out the one that best aligns with your inclination and personality. For instance, a digital savvy advisor may elect to invest their efforts into creating an online presence. Someone with a background or interest in athletics may look to sponsor and/or get involved with local sports leagues. 

Related to this, your prospecting strategy must create visibility and interactions with your target demographic. This means defining your ideal client in terms of income, wealth, age, occupation, etc. 

Finally, you can look at your network and existing clients for referrals for prospects who may be receptive to your message or services. Often, these have the highest conversion rate but are only earned through years of building trust. 

Finsum: Having a strong pipeline of prospects is necessary for an advisors’ success. Here are some tips on formulating an effective strategy.