IN: MS Hikes Advisory Sweep Rate
Investment News writes, "Morgan Stanley boosts returns on client cash, analyst says." The article tells us, "Morgan Stanley last week increased yields on cash held in advisory accounts, according to a report by an industry analyst, two-and-a-half years after large firms began facing questions on whether they were short-changing clients on interest rates." They quote Steven Chubak, managing director of Wolfe Research, "Morgan Stanley raised deposit rates on investment advisory accounts to 3.6%, from 2.2% previously." The piece continues, "A spokesperson for Morgan Stanley declined to comment. Since 2023, large firms have been facing penalties and questions from regulators over interest rates for clients' cash accounts." Investment News explains, "Following news of Morgan Stanley's bump in interest rates to clients' cash holdings, Friday saw a selloff more broadly in wealth management and brokerage stocks, Chubak noted. Large wealth management firms see revenues and profits from cash held in clients accounts. A higher payout to clients would mean less profits from cash sweep accounts." The piece adds, "The share price of Morgan Stanley declined 4% to $212.03, while LPL Financial Holdings Inc. and Stifel Financial Corp. dropped 3.1%, respectively, to $268.75 per share and $69.27 per share. The Securities and Exchange Commission last year ended its investigation into Morgan Stanley's advisory cash sweep program without pursuing any enforcement action. The closure of the probe brought to an end more than a year of scrutiny by the SEC's enforcement division, which since April 2024 had sought information regarding how uninvested client cash was swept into affiliated bank deposit accounts." (Note: According to our latest Brokerage Sweep Intelligence, Morgan Stanley is only paying the 3.6% rate on balances over $250K.)
