Morgan Stanley will increase some cash yields to 2%
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.
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