Morgan Stanley Chairman and CEO James Gorman doubts the financial advice business will see the same sort of price war that is taking place among the discount broker trading platforms.
Several retail brokers are now offering free trading to retail clients, and during a Morgan Stanley earnings conference call, an analyst asked Gorman if financial advisers would start to see the same sort of price pressure on the advice they give. Gorman noted that rates being charged for financial advice are fair as long advisers are providing value.
"When you put together research, the trade execution, the financial planning, tying people in with their long-term charitable giving, their trust and estate planning working with their accountants, it's complicated stuff," he said.
He added that without the proper advice, clients could face tax implications that greatly outweigh the fees they pay financial advisers. However, Gorman noted that not all clients need to have relationships with financial advisers. Morgan Stanley has been encouraging households with less than $100,000 in assets to use its online platform.
"Somebody with $39,000, as I've said many, many times, does not need a financial adviser and won't get the attention of a financial adviser," he said.
He added that the sweet spot for Morgan Stanley is households with at least $1 million in assets.
"That's where the growth is," Gorman said. "And in my view, that's where the advice fee is very fair and very reasonable given the value created."