However the wealth unit reported net revenues in the third quarter rose 3% to $3.3bn over the same period.
22% rise in fee-based client accounts
Total client assets were $1.8trn at quarter end, while client assets in fee based accounts were $556bn, or 31% of total client assets quarter-on-quarter, according to the bank.
Morgan Stanley also reported a 22% rise in fee-based client accounts on a yearly basis.
In its earnings call on 18 October, Morgan Stanley CEO and Morgan Stanley Smith Barney (MSSB) chairman, James Gorman said: "A key to our future is increased contribution of wealth management to our revenue, profitability, returns and funding stability."
Purchase of remaining MSSB stake
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Gorman also spoke about Morgan Stanley’s deal with Citigroup to acquire full control of the MSSB wealth management joint venture.
Morgan Stanley purchased an extra 14% of the wealth management joint venture in June, increasing its ownership stake to 65%, and is now set to purchase the remaining 35%.
"We purchased 14% of the wealth management joint venture, while locking in the price and greater flexibility for the remaining 35%. We are beginning to unlock the full potential of the global wealth management franchise", he said.
This week, Citigroup took a $4.7bn hit from selling its 14% stake in the MSSB joint venture and an other-than-temporary impairment of the carrying value of Citigroup’s remaining 35% interest in MSSB.
Source: Private Banker International