E-Trade will give Morgan Stanley a new pool of cheap cash deposits on which it doesn’t have to pay much interest
Photo: Justin Sullivan/Getty Images It seems as if these should be lean times in the consumer brokerage business, with all the major online stockbrokers cutting their commissions on stock trades to $0.
So after Schwab bought TD Ameritrade, I’m not surprised to see that the next-biggest online broker, E-Trade, is getting bought by Morgan Stanley, which has an investment-banking business and a wealth-management business aimed at wealthy individuals who pay human advisors to manage their money.
Essentially, E-Trade is better than Morgan Stanley at borrowing, and Morgan Stanley is better than E-Trade at lending. So putting the two together should make for a more efficient and more profitable bank than if they stayed separate. There’s also some synergy, because mass-affluent customers of discount brokerages like E-Trade sometimes age into wealthy customers who become good fits for Morgan Stanley’s more traditional wealth-management business.
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