Morgan Stanley’s (NYSE:MS) Wealth Management division is under probe, a Wall Street Journal report highlighted. Per the report, the U.S. Federal Reserve is currently investigating the financial services giant’s wealth-management division, focusing on assessing the adequacy of the bank’s measures to prevent the potential money laundering activities of affluent foreign clients.
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Let’s delve deeper.
Morgan Stanley Lacked Risk Management Controls
Initially, the Federal Reserve started the investigation as a routine examination. However, it intensified when the regulator discovered deficiencies in the bank’s foreign wealth-management clients’ due diligence practices and anti-money laundering initiatives in 2020.
While the Fed communicated a list of issues to Morgan Stanley that required resolution, the bank still needs to address them. Thus, the Fed is examining Morgan Stanley’s procedures for screening foreign customers and scrutinizing the sources of their wealth before accepting them as clients.
Though the outcome of the investigation remains to be seen, investors should note that the wealth management segment is critical to Morgan Stanley’s success as it generates roughly half of its revenues. The segment generates durable growth thanks to its asset-led strategy, which provides steady fee-based flows and supports asset management revenues. Further, Morgan Stanley’s wealth management segment delivered revenues of $6.4 billion in Q3, which improved year-over-year. With this in mind, let’s look at the Street’s recommendation for Morgan Stanley stock.
Is Morgan Stanley a Good Stock to Buy?
Wall Street analysts are cautiously optimistic about Morgan Stanley stock amid rising deposit costs that could weigh on net interest margins. With 13 Buy and seven Hold recommendations, MS stock sports a Moderate Buy consensus rating. At the same time, the average MS stock price target of $91.62 implies 20.6% upside potential from current levels.
