Morgan Stanley posts $15.2B in alt net flows as wirehouses push alts and AI

Merrill, Morgan Stanley and Wells Fargo are expanding their sales of alternative investments and AI tools for advisors in 2026, according to InvestmentNews. The three wirehouses employ or work with roughly 40,000 financial advisors, based on historic data, and those advisors are the industry's highest average producers of annual revenue, the coverage says.

Morgan Stanley reported Wednesday morning that net flows to alternative investments for the quarter ending Sept. 30 were $15.2 billion, per InvestmentNews. The quarter's net flows were down 8% from the end of September 2025 and up 20% from the end of the second quarter in June. Chief financial officer Sharon Yeshaya told analysts on the call that trading activity had moderated from the second quarter while retail engagement across the firm's product offering remained healthy, with alternatives delivering "another quarter of record sales."

Why a lift in alt sales registers on the bottom line: alternatives typically cost more than plain stock and bond funds, and advisors sell them to clients seeking higher yields and diversification, according to the coverage. Real estate investment trusts and private credit funds are named as two popular examples.

A senior executive in the alternative investment industry who spoke privately to InvestmentNews said the next wave of wirehouse offerings centers on private equity and infrastructure. The same executive pointed to model portfolios that make it easier to allocate to an alternative "without the advisor making a strict allocation," and described that as how the wirehouses are driving adoption.

Alternative investment managers, Blackstone among them, began their push into the wirehouse market to work with advisors' wealthy retail clients about a decade ago, per the coverage.

Yeshaya also said on the call that AI is "fundamentally changing what our teams do," and that controls are in place, according to the coverage. InvestmentNews frames AI at large firms as a potential source of cost savings and a boost to profits as the technology replaces back-office work.

For advisors at these firms, the model-portfolio route is the detail to watch. If alts arrive pre-packaged in models rather than as standalone recommendations, the allocation decision moves further from the individual advisor's judgment and closer to the model's construction — a shift that would matter most at firms whose alt business is advisor-initiated today.