On Thursday, Morgan Stanley announced it was buying E-Trade, an online brokerage with 5.2 million client accounts and over $360 billion in client assets. The $13 billion, all-stock deal is the biggest bank takeover since the financial crisis.
Drew Pascarella, senior lecturer of finance at the Cornell University SC Johnson College of Business, says the move allows Morgan Stanley to cash in on growing online revenue streams.
“The business model disruption we’ve seen in asset management has arguably been the most dramatic across the financial services landscape.
“With equity trading now free, brokerage firms need to find new ways to generate sustainable revenue. Providing wealth management advice digitally is one such revenue stream. Morgan Stanley has an early lead in this area: acquiring E-Trade provides them with a massive base of clients to whom they will sell advice. There are significant economies of scale and cost-related advantages from this deal, too. Overall I see this as a nice win for both Morgan Stanley and E-Trade.”