Morgan Stanley executives last week said the wirehouse bank, like its competitors, was it raising rates on clients’ cash in advisory sweep accounts. At the time, the firm did not reveal details about the changes.
This week, details are emerging about the changes in client cash at Morgan Stanley, with a spokesperson at the wirehouse confirming a report it was increasing the interest rate it pays to clients on cash in their advisory accounts to 2%.
Industry news website AdvisorHub first reported on Tuesday the changes in yields on client cash at Morgan Stanley.
The Securities and Exchange Commission has been focused on cash sweep account options for the past few years and has made sizable settlements regarding the issue, most notably with the Charles Schwab Corp. in 2022 for $187 million.
Wells Fargo disclosed last fall that it was facing an “advisory account cash sweep investigation” by the commission. Advisory accounts at broker-dealers charge clients fees rather than commissions.
The changes in yields on cash are a big problem for future profits at large wealth management and brokerage firms. Wells Fargo this month reported that increasing interest rates on advisory accounts to put them in line with yields on money market funds is expected to reduce net interest income by approximately $350 million in 2024. One securities analyst said last week that higher interest rates on clients’ cash held in advisory accounts may cost LPL Financial Holdings Inc. as much as $380 million,
Morgan Stanley will be increasing the rate structure for certain bank deposit program - or "BDP" deposits in clients’ Investment Advisory Accounts, according to a source familiar with the changes who asked to speak privately about the matter. The firm is making this change due to the competitive landscape for deposits in comparable sweep accounts.
Effective August 1, clients with total deposits in the "BDP" program from $250,000 and above will receive an annual percentage yields of 2% those balances within their Investment Advisory Accounts custodied with Morgan Stanley, according to the source. That's compared to the 0.01% annual yield that the firm currently offers on a $250,000 account. Some money market funds are currently yielding close to 5%.
Morgan Stanley’s roughly 15,000 brokers were informed of the new rate on Tuesday afternoon.
"Reports indicate Morgan Stanley is only moving to 2% on advisory sweeps versus close to 5% at Wells Fargo and Bank of America," wrote Steven Chubak, managing director of Wolfe Research, in a note this morning.
"More notable is that these changes are not being applied to advisory accounts broadly and only to those with more than $250,000 in cash," he wrote. "This is an interesting development in this whole sweep deposit pricing saga as Morgan Stanley is taking what most investors and industry execs are describing as 'not even a half measure.'"
Canadian stocks are on a roll in 2025 as the country prepares to name a new Prime Minister.
Two C-level leaders reveal the new time-saving tools they've implemented and what advisors are doing with their newly freed-up hours.
The RIA led by Merrill Lynch veteran John Thiel is helping its advisors take part in the growing trend toward fee-based annuities.
Driven by robust transaction activity amid market turbulence and increased focus on billion-dollar plus targets, Echelon Partners expects another all-time high in 2025.
The looming threat of federal funding cuts to state and local governments has lawmakers weighing a levy that was phased out in 1981.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
