By Andrew Welsch

Brokerage and wealth management stocks are taking a beating -- again.

After suffering significant losses on Thursday in the wake of President Donald Trump's tariff rollout, these stocks continued to fall on Friday morning.

Shares of Robinhood Markets were among those hardest hit, plummeting 13.8%. Charles Schwab and Interactive Brokers dropped 8% and 9%, respectively. Morgan Stanley, which operates a large wealth management business that includes online broker E*Trade, tumbled 9%.

The S&P 500 was down 4%, and the Vanguard Financials ETF, which tracks a broad basket of financial stocks, was down 6.5%.

Brokerage firms and wealth managers may not feel the direct impact of tariffs. After all, these companies aren't importing cars. But the selloff reflects investor fears that the tariffs will cause an economic slowdown or recession.

Tumbling equity markets will reduce the fees wealth management companies collect on the assets they manage. Although these companies used to rely on commissions for securities transactions for revenue, they now generate significant revenue on asset-based fees. "Market volatility will lead to an initial surge in trading, however, selloffs eventually lead to lower trading volumes and less assets under management," says Gene Goldman, chief investment officer at Cetera Financial Group, a privately held wealth management company. "Less assets under management equates to lower fee revenue."

A weaker economy likely will crimp investors' ability to put more money into their investment accounts, denting companies' net new asset flows. The gloomy economic outlook is also clouding the forecast for mergers and acquisitions. When clients sell a business or take it public, they typically receive a windfall they invest with wealth managers. At the start of this year, Wall Street's outlook for investment banking was rosy. Not so anymore.

Companies such as Morgan Stanley that operate both investment banks and wealth management units saw their stocks tumble. Stifel Financial, which operates investment banking and wealth management units, plunged 9%.

Other wealth managers were getting hit hard. Shares of LPL Financial, which oversaw client assets of $1.8 trillion at the end of February, plunged 12%. Raymond James' stock dropped 6.1%; the company advised on client assets of $1.6 trillion as of Feb. 28.

Write to Andrew Welsch at andrew.welsch@barrons.com

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April 04, 2025 11:29 ET (15:29 GMT)

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