Morgan Stanley to Raise Fees 17-33% on Most Retail Accounts
Morgan Stanley is raising account fees for retail brokerage customers who insist on having statements, tax forms and other documents mailed to them.
As of November 1, the brokerage giant will raise annual fees by $25 on its basic investment and individual retirement accounts to $175 and $100 respectively, a spokesman confirmed. The fee increase will be waived if customers agree to have all mailings delivered to them by e-mail.
“We periodically evaluate fees and other costs of doing business, and we saw this as an opportunity to incentivize clients to avail themselves of electronic delivery, which is convenient and cheaper for everyone involved,” said James Wiggins, a spokesman for the world’s biggest brokerage firm, as measured by its almost 16,000 advisors.
Morgan Stanley will continue to waive account fees for so-called Reserved-status clients with household assets of $1 million or more at the New York-based bank or who generate $10,000 of annual fees and commissions, Wiggins said.
Some brokers expressed irritation at having to discuss the hikes at a time when low rates and volatile returns have frayed their customers’ nerves. Morgan Stanley this year also has been reducing client support staff, trimming travel budgets and eliminating perks such as branch plant-care services as part of Chief Executive James Gorman’s goal of cutting $1 billion from annual expenses by the end of 2017.
The account fee hikes are the first in years, and are not part of the broader “Project Streamline” that Gorman has outlined, Wiggins said.
Other brokers and managers said Morgan Stanley has given them plenty of time to prepare clients for the hikes, and is understandably promoting electronic delivery as it prepares for additional disclosure documents that will be required under the Department of Labor’s new fiduciary standard that becomes effective in April for retirement account holders. As with critics of the hikes, the employees declined to be identified because they are not authorized to speak for Morgan Stanley.
Gorman has described the costs accompanying the DOL rule as “manageable,” but reiterated in discussing the company’s second-quarter earnings on Wednesday that expense control is an essential part of his profit plan as low rates and geopolitical uncertainty continue to buffet revenues.
Expenses at Morgan Stanley’s wealth management division rose 1% in the second quarter to $800 million from $794 million in the first quarter. The company does not break out specific expenses but spent $429 million throughout all of its businesses on information processing and communications, which includes mailing costs.
Spokespeople at rivals Merrill Lynch, UBS Financial Services and Wells Fargo Advisors declined to discuss whether fees will be raised or did not return calls for comment. Robert W. Baird, a Wisconsin-based brokerage firm, plans to raise its annual fee by $25 this year for small and inactive accounts, according to two sources at the company.
Several brokers said they expect expect other firms to follow Morgan Stanley’s lead in distinguishing between email and snail-mail delivery.
Vanguard Investment Services charges a $20 annual account service fee for all brokerage accounts and on Vanguard mutual funds with balances of less than $10,000. As of 2007, however, it eliminated the fee for clients who accept electronic statements, a spokesman said.