Broker consolidation has only just begun.
Just months ago, Charles Schwab bought TD Ameritrade in a $26 billion all-stock deal, creating a company with more than $5 trillion in client assets.
“We believe the combination of our two great companies positions us to be competing and winning in the investment services business for the long run — the very long run,” said Charles Schwab president and CEO Walter Bettinger at the time, as quoted by CNBC.
Morgan Stanley is Buying E-Trade for $13 Billion
Then, just today, Morgan Stanley announced it will buy E-Trade for $13 billion, or $58.74 a share. The all-stock takeover will now add $360 billion worth of client assets to Morgan Stanley’s current $2.7 trillion. It’ll all give Morgan Stanley access to E-Trade’s five million customers, and $56 billion worth of deposits.
“E*TRADE represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy,” Morgan Stanley Chairman and CEO James Gorman said, as also quoted by CNBC. “In addition, this continues the decade-long transition of our Firm to a more balance sheet light business mix, emphasizing more durable sources of revenue,” he added.
“We’ll take on Schwab. We’ll take on Fidelity. This isn’t about legacy-building; it’s about getting [Morgan Stanley] ready for prime time.”
When the deal is all said and done, Morgan Stanley will have successfully broadened its business with a direct to consumer brokerage firm. It’ll also help serve as a counter-weight to the more volatile side of its business, such as its institutional trading of stocks.
This may just be the start of further consolidation efforts
The retail brokerage industry is being transformed with no-fee price wards, and consolidation, which isn’t likely to end soon. In fact, “The market is going to incentivize and favor and push for consolidation because when commissions are no longer a revenue stream … it favors large cash on hand,” said Wakerfield Research partner, Paul Bragan. “Expect more consolidation throughout the industry,” said Michael Spellacy, a capital markets expert at Accenture, as quoted by MarketWatch. “We are in the early innings.”
