James P. Gorman
Chairman and Chief Executive Officer at Morgan Stanley
Thank you, operator, and good morning, everyone. Thanks for joining us. The macro backdrop of the last year presented challenges we haven't seen for some time. The combined impact of persistent inflation and rapid central bank tightening, pressured asset levels and led to some -- led to very little strategic activity in capital raising. Price volatility throughout the year, Morgan Stanley demonstrated resilience and delivered on ROTCE of 16%, including integration-related expenses from our deals.
The Firm did what it was supposed to do, with our most stable Wealth and Investment Management businesses offsetting declines in institutional securities. This is hard evidence of the transformation we've made to become increasingly durable and a stark contrast to the 8% ROTCE we had in the last notable challenging environment of 2015. When markets rebound, we will capitalize on growth once again across the full firm and from an even stronger position.
Before turning to Sharon to discuss the details of the fourth quarter and the full-year, I'll walk you through now how we plan to achieve these goals in our annual strategic update appropriately titled delivering growth for the next decade. Briefly, first I'd like to acknowledge the many contributions Jon Pruzan made as CFO and COO. As you know, he's retiring from Morgan Stanley at the end of this month and we wish him the absolute best.
Please now turn to the deck and to Slide 3. What informs our confidence in growth strategy is that we know who we are. We've been clear about that for over a decade. A clarity of purpose has been a key driver about success to date and the next decade will be no different.
On Slide 4, you can see we've been consistent since the financial crisis. We have a client-centric franchise with the permanent objective to facilitate capital flows between those who have it and those who need it. We are committed to our clients and to the markets wherein, clearly illustrated by the leading competitive position we have. In each of our businesses, we have a significant competitive moat, which will enable us to maintain and further enhance our strength.
Slide 5 highlights the strategic decisions we've made over the past decade with the focus on the lining markets ourselves to the market where we perform best, and these are core businesses with scale in major markets that are on the whole more balance sheet light and benefit from more durable fee-based revenues. We continue to invest in these areas to drive future growth. We have a proven track record in our ability to acquire and integrate the businesses that are aligned with the strategy, namely within Wealth and Investment Management. Importantly, we have also taken action to get out of the businesses that are not core to this per capital. While we may facilitate activities across varied markets, we do not own businesses that are built around unsecured consumer credit, payments, physical handling of commodities and the like. Instead, we focus on markets we know best and our ability is there to support our clients in those markets.
Please turn to Slide 6. This illustrates the ongoing growth and shift of our business mix. As we continue to grow our client assets, we expect Wealth and Investment Management will become an increasingly larger portion of the firm's pretax profit. The stability of the firm will be further enhanced by this growth, all the while coupled with a pre-eminent institutional franchise.
Fair to say our business model was tested this year, as you can see on Slide 7. 2022 as a paradigm shift with firstly the Commons Act, continuation of the first pandemic in a 100 years, the first war in Europe in 70 years and the highest inflation in 40 years. Despite lower asset values and an anemic underwriting calendar, the firm performed well. We generated, as I said before, a 16% ROTCE at the most excess risk-based capital of our peers and attracted over $300 billion of net new assets, all while integrating two major acquisitions.
So, now moving to the opportunities to maximize growth in the next decade, let's start with Wealth Management. On Slide 8, you can see we have leadership positions across channels, reflecting our combination of best-in class advice and best-in class technology, and we have the ability to meet any client wherever they are in their wealth accumulation journey. This allows us to grow with our clients along the way and provides the opportunity for clients to migrate growth channels. The growth of that business is reflected in a higher average daily, something I've been tracking for well over a decade. 2022 every trading day saw revenues in excess of $80 million and over one-third of those exceeded $100 million a day. Contrast that with only three years ago where 95% of trading revenues were each below -- were each below $80 million and none exceeded $100 million.
It is true the journey is illustrated on Slide 7. Wealth Management has gone through a powerful transformation as you all know, including with the most significant recent acquisitions and of E TRADE and Solium, which have expanded our client base with two new channels. Today, we have 18 million relationships. We're focused on deepening those relationships part in the right product at the right time and consolidating assets onto our platform. From here, we're building on the scale and the tools to reach and the reach that will propel future growth.
Net interest income has certainly been part of the profitability expansion to date, and you can see the driving forces highlighted on Slide 10. We have invested in expanding our bank offerings, allowing us to operate attractive products to our clients on both sides of their balance sheet to meet their needs. We've nearly doubled our lending balances over the last three years and we expect to continue to grow attractive high-quality loans.
On the other side, our deposits franchise has grown significantly since 2019 and will continue to support future NII through various cycles. Approximately 90% of our deposits are sourced from our Wealth Management client base. And in the current rising rate environment, our cost of deposits is more efficient than that we experienced in the last rate hiking cycle. Sharon will discuss this important topic and our outlook around NII further in a few minutes.
Let's turn to Slide 11. Lets now talk about NNA growth, net new assets. Over the last three years, our platform generated nearly $1 trillion of net new assets, showing a clear step change from prior periods and marking Morgan Stanley as a leader across our peer group as an asset accumulator. Given the scale and reach of our businesses, we expect to deliver this pace of asset accumulation going forward. Obviously, there'll be ups and downs in individual years, but over a three year period we expect to drive approximately $1 trillion in net new assets.
Most importantly, as you can see on the right hand side of this page, no single source is accounting for greater than 25% of this net new money. Some people think it's just a result of recruiting, it is absolutely not. It's a combination of several things which the team has described as filling the funnel of net new money.
You can see on Slide 12, which shows the growth in client assets. We have experienced that through our workplace channel. We estimate now that relationships, wealth held away is expanded by about 4 times in the last three years. So our ability to serve clients across the entire wealth spectrum, we are well-positioned to consolidate a portion of these assets. Further, the workplace channel continues to bring new relationships to the platform. We've executed on key steps to deepen those. We have already reached our goal to rollout Companion Accounts to 90% of workplace participants and to achieve 30% retention of stock plan assets. We look forward to even higher retention.
The results of our advice-driven strategy are illustrated on Slide 13. The workplace channel has driven the majority of our growth in client relationships and stands at 12 million relationships today. While it can take several years to deepen those, we've already seen success in some parts of the offering that are the stock plan administrators services. Over the last three years, we had approximately $350 billion of after-tax vested inflows. First thing I said, gives us more opportunity to deliver an integrated client experience and that's allowed us to showcase the power of advice. To date, we have already seen advisor-led flows of approximately $150 billion that originated from a workplace relationship. Portion of those assets are the stock plan vested balances, but a larger portion are from assets that were previously held away. In short, we will -- as we deliver a full suite of capabilities, our strategy to attract funds through advice is working.
Investment management has also delivered strong fee-based growth over the course of it's own transformation, as you can see on Slide 14, which encapsulates the business together with Eaton Vance. This business has more than doubled it's durable asset management and related fees since 2014. And importantly, this significantly larger revenue base is more diversified. The increased diversification from fixed income, customization and alternatives continues to support results in more volatile equity markets.
We remain very aligned to key growth areas. Our alternatives investable capital is at $210 billion with strong growth in private credit, real assets, including infrastructure, our multi-strategy hedge fund platform and special situations, and customization by our market-leading Parametric business continues to be a significant growth engine.
Shifting to Institutional Securities on Slide 15. We have a global and balanced franchise, and our integrated investment bank has and continues to focus on meeting clients where they are active. This has served us well, as our strength is evident across various market environments. We remain a leader in equity and investment banking and have steadily rebuilt that fixed-income franchise focused on our strongest capabilities.
On Slide 16, you can see our institutional business remains a top three global leader in the industry as demonstrated by our wallet share position. We have demonstrated our ability to defend share and gain it in relatively more capital-light businesses. At the same time, we've shown prudence of resources as illustrated clearly by the disciplined RWA usage, which actually dropped from 21 to 22, and our consistent G-SIB surcharge of 3%.
Let's move to our capital strategy on Slide 17. We have 200 basis points of excess capital above our regulatory requirement. This is intentional. Our capital strategy has focused on bringing the risk down in our businesses and we've seen a steady decline in our SCB, excluding the dividend add-on relative -- reflective of a more durable business mix. Our capital position gives us enormous flexibility and we're comfortable with that decision to be prudently positioned.
On Slide 8, you can see our excess capital position enables us to continue to invest in our business for future growth and deliver robust returns to shareholders. Our business transformation, especially the durable earnings from Wealth and Investment Management enable us to double our dividend -- enabled us to double our dividend in 2021 and further by 11% in 2022. Over the same time, we've reduced our shares outstanding from the much higher levels, driven by the impact of our recent acquisitions. Taken together, we delivered a 9% capital return to our shareholders last year. We remain committed to ongoing shareholder return, adjusting always whatever the business performances and the reg -- and the regulatory requirements demand.
Shifting to how we see the future state on Slide 19. Starting with the expected path to $10 trillion in client assets across Wealth and Investment Management. We've demonstrated our ability to generate over the last three years positive net new assets of approximately $300 million a year. Combining that with reasonable average market assumptions gives us the confidence this will lead to $10 trillion in client assets in reasonable years ahead.
Now let's consider this within the broader term picture and bear with me for a minute. In 2022, the Firm delivered $14 billion of pretax profit. In this future scenario of $10 trillion of assets, which I believe will happen, generating approximately 50 basis points of revenue, which is about what we're doing currently at the 30% pretax margin, which is within 2% of what we're doing currently. If you put that math together, it should create of itself over $14 billion of pre-tax income. As you can see, that exceeds that of the full Firm from today just from the Wealth and Asset Management businesses.
So, if you pull it all together, just to wrap it up, Slide 20 reiterates our confidence in our performance goals. They have not changed on account of what's going on the markets in the last 12 months. These are the metrics we need to support our longer-term objectives. Of note, we've added a new goal that I spoke to earlier that we've talked about in the last six months, to generate $1 trillion in net new assets approximately every three years. Again, I'm sure there'll be volatility quarter-by-quarter, year-by-year but as we've demonstrated through the funnel of sources, we expect an outcome over three years approximately $1 trillion. That's about, by the way, 5% to 7% of beginning period assets within Wealth and Asset Management.
As we approach 2023, we do so with client confidence. Recognizing we have a line of sight with the durability by Wealth and Investment Management businesses and our market share leading positions across much of institutional securities. As always, our objectives are subject to major moves in the economic, political or regulatory environment. However, with a constructive outlook and a proven track record we've delivered thus far, we fully expect to achieve our goals over time.
I will now turn the call over to Sharon, who will discuss the fourth quarter and annual results, and we'd be delighted to take your questions.
