Morgan Stanley IRA Review
Morgan Stanley Roth IRA, Traditional IRA, Rollover IRA, SEP IRA, SIMPLE IRA (individual retirement accounts) review, rates, IRA fees and commissions schedule. Is Morgan Stanley IRA good and safe way to invest?
- Roth IRA
- Traditional IRA
- Inherited IRA
- Inherited Roth IRA
- SIMPLE IRA
- SEP IRA
Morgan Stanley offers many different types of IRAs on a custodial basis, meaning that the ownership remains with the individual client and the firm merely holds or “custodies” the assets
in the account. Offered to clients are a pretty standard range of options for the industry; including but not limited to Roth IRAs, Traditional IRAs, Inherited IRAs, SIMPLE IRAs, and SEP IRAs. Most of the rules and capabilities of these accounts are determined at a regulatory level, as opposed to being influenced by firm decisions. Among these regulatory-level rules are the list that follows:
- Deductibility of IRA contributions
- Income levels for contributing to Roth IRAs
- Recharacterization and Reconversion of Contributions
- Inability to extend margin borrowing in retirement accounts
- Rollover contributions and Code-0 direct transfers
However, there are a number of details and features that make choosing Morgan Stanley as a custodian potentially different from other firms in the industry.
Morgan Stanley IRA Fees & Costs
Morgan Stanley and other “full-service” investment firms have gotten the reputation over the last decade as making little effort to continually
provide more cost effective solutions to clients. In the age of retail and discount firms rapidly gaining popularity, the full-service firms like Morgan Stanley are often said to only compete on a performance basis. Many clients feel that the costs are less than fully transparent and in some cases excessive.
Morgan Stanley IRA Account Fees
Unlike many discount firms, Morgan Stanley charges $75 annually simply for custodying IRAs and the inherent maintenance of these accounts. If a client decides to transfer his or her IRA out to another firm, they will be stuck with another $95 as an Account Transfer Fee. Clients will also be charged $95 for Account Termination if they decide to close their IRA entirely, presumably taking a distribution or making a transfer. In the event of termination and transfer, only one $95 will be charged.
Morgan Stanley Low Balance Household Fee
Morgan Stanley requires that clients maintain at least $25,000 in eligible assets across all accounts at the firm. If this condition is not met, the household will be charged $50 per calendar year to one account in the group. Low balance fees have come under fire in recent years as it portrays an unwillingness to work with clients that do not possess a high net worth or clients that prefer to keep assets spread among multiple firms.
The fee schedule given to clients upon applying vaguely states that additional charges could apply at any time. With very uncertain terms and a lack of explanation, the fee schedule refers clients to speak with their private advisors about the opaque costs. Full-service firms like Morgan Stanley are notorious for rubbing investors the wrong way with exorbitant and ill-explained charges.
Morgan Stanley IRAs employ a “sweep” feature for uninvested cash. Essentially, cash that remains uninvested at the end of the trading day can be moved to a bank deposit account overnight. This has become standard industry practice, as the funds in the bank deposit account are subject to regular levels of FDIC insurance. Funds left in the IRA would not enjoy the $250,000 of protection from the FDIC.
IRAs are also eligible for Electronic Funds Transfer, making it easier to take distributions or contribute to the account. The fee schedule is unclear on the costs that could be associated with the electronic transfers.
Morgan Stanley offers a wide array of investment direction and advisory offerings, like many full-service and now even retail investment firms. As is industry practice, there is little transparency in the cost of obtaining an advisor for your IRA without speaking to sales individuals with the firm. Advisors usually participate in decision-making as opposed to taking complete control.
Managed accounts are also available for IRAs at Morgan Stanley. Managed accounts differ from advisory offerings in that the client can opt to make no investment decisions and simply let the account be 100% under control of the Manager. Costs associated with managed accounts vary greatly depending on a multitude of factors.
Designating beneficiaries on IRAs at Morgan Stanley is also an option. Assigning beneficiaries to an account can help a great deal in the process of settling a deceased account holder’s affairs, and it can also keep important assets out of lengthy and complicated probate proceedings.
Morgan Stanley Small Business IRA Plans
SIMPLE IRAs are offered at Morgan Stanley and are often best for small businesses that employ less than 100 people. One of the main benefits of this type of plan is that employees are 100% vested in the funds right away. Employers are required to contribute to SIMPLE IRAs, and employees can elect to do the same.
SEP IRAs are usually enacted by business owners who have no employees or small businesses with employees who meet certain regulatory compensation or tenure requirements. No annual funding of SEP IRAs is required, but contributions must be made for each eligible employee in any year the plan does get funded.
Both of these plans follow the regular 10% early penalty for withdrawals by a person under the age of 59 ½. However, SIMPLE IRAs hold the additional stipulation that in the first two years of participation in the plan any withdrawals are penalized at 25%.
Article was updated on 1/22/2017.