The investment bank for millionaires, Morgan Stanley, is in the process of buying E-trade Financial, a successful international brokering firm, for around $13 billion.
In what some have now called one of Wall Street’s biggest deals since the crash over a decade ago, Morgan Stanley is set to buy E-trade in a $13 billion all-stock transaction. This new deal is expected to further Morgan Stanley’s ongoing transformation into a more reliable financial firm that relies more on assets and wealth management.
The purchase of E-trade will see up to 5.2 million client accounts transferred, about $360 billion in retail clients’ assets and numerous other customers who may now be attracted by the expansion of the firm’s expertise. The primary competitor, Charles Schwab and TD Ameritrade are currently mid-merger, so this deal is expected to further consolidate Morgan Stanley and E-Trade position in the investment brokerage markets.
Forrester’s senior analyst, Vijay Raghavan, speaking with Finance Monthly said this: “In the wake of the price war that first started when Schwab got rid of stock trading commissions, E-trade was weakened because of its reliance on commissions – just like TD Ameritrade (before it was acquired by Charles Schwab).
“Nearly half of E-trade’s customer base (48%) is comprised of self-directed investors. Self-directed investors prefer robust trading tools, real-time market commentary, and charting tools, to name a few.
“Morgan Stanley’s wealth management business serves an affluent investor base who comprise the delegator segment, relying on financial advisors to make investment decisions for them.
“This acquisition complements Morgan Stanley’s existing affluent customer base, providing them with a wider array of customers with different levels of investable assets. It also gives them a direct-to-consumer brokerage business, and $56 billion in deposits which will help cut down on risk during an economic downturn.”
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