If approved, the transactionwould give Morgan Stanley both direct-to-consumer and digitalcapabilities to compete more aggressively with Merrill Edge andother mass-affluent offerings from rivals. (Photo:Shutterstock)
Morgan Stanley is buyingdiscount broker E-Trade Financial for $13 billion, creating a firmthat could have over $3 trillion in client assets.
|The news comes three monthsafter Charles Schwab said itwas acquiring TD Ameritrade for $26 billion. That merger, now goingthrough antitrust review, would potentially lead to a combined firmwith $5 trillion in assets.
|"E-Trade represents anextraordinary growth opportunity for our wealth-management businessand a leap forward in our wealth-management strategy," MorganStanley CEO James Gorman said in a statement.
|If approved, the transactionwould give Morgan Stanley both direct-to-consumer and digitalcapabilities to compete more aggressively with Merrill Edge andother mass-affluent offerings from rivals. Morgan Stanley's 15,500financial advisors focus more on high-net-worth and ultra-high networth clients.
|"This continues the decade-longtransition of our firm to a more balance-sheet-light business mix,emphasizing more durable sources of revenue," Gormansaid.
'Hefty price'
Not everyone agrees with MorganStanley's rosy view of the deal.
|"They'll be writing a big chunkof this down in the coming years. There's nothing here. Imagineacquiring customers who don't plan to pay you for anything?" saidJosh Brown, CEO of RitholtzWealth Management, on Twitter.
|"It's a pretty hefty price,"Alison Williams, an analyst at Bloomberg Intelligence, said onBloomberg Television, adding that the move "is consistent withMorgan Stanley's strategy" to push further into the mass-affluentmarket.
|But credit analyst David Havensat Imperial Capital said in a note to clients that the deal"deepens the 'safe' wealth management franchise — rich in fees andstability" and "reduces reliance on the more mercurial trading andmarkets businesses."
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Janet Levaux
Janet Levaux, MA/MBA, is Editor in Chief of ThinkAdvisor & Investment Advisor. She's covered the financial markets since 1991 and advisors since 2005. Janet studied at Yale, Johns Hopkins SAIS and St. Mary's College of California. She's also lived and worked in Asia, Europe and Latin America, raised two sons, and won a Neal Award for top news coverage in 2020.
