MS to buy E-Trade

very interesting deal. a trend in PWM has been to broaden the base of clients. MS, ML, and UBS had been losing the fringe client to schwab, etrade, TDA, fidelity, vanguard, because of higher costs and whatnot, but mostly because of a lack of diversity on their platforms. as a client of one of the big firms, you had no access to self directed trading (or limited), archaic technology, and so on. so basically you had full service advisory (what I do) or self directed advisory (what eTrade does) but they never resided at the same companies.

then Merrill came out with merrill edge and everyone held their collective breath. it's turned into a good lead source for full-service advisory. imagine you're retired at 60 with $10mm, you love your merrill guy, but your son & daughter who are just starting out (maybe in late 20s/early 30s) don't need your merrill guy and are likely turned off by his old school way of doing things. they may need advice, but also want some DIY tools and technology. merrill edge set the standard for this, giving these folks a simple, low cost way to get advice without paying full freight (for admittedly less service, but if they don't need it, who cares).

in addition to that, merrill/morgan/ubs have been losing corporate business to low cost providers for years. say you work at a company and part of your compensation is in stock, companies like the big 3 would administer the plan, charge a token amount for that, but then capture the wealth from executives selling out of their stock. the only problem is the lower level employees with stock don't want to do business with the big 3 as they stood, and companies like eTrade/fidelity/schwab realized this. they lowered their costs (after all, they're not paying their brokers well) and started taking business from the big 3 and have leveled the playing field a bit. this move gives MS a very competitive position in this space and from a corporate side, puts them ahead of merrill and UBS (arguable who's #1 in private wealth, but we'll leave that alone).

finally, all firms want to say "yes." the old days of only doing business with people worth a certain amount (at the firm level) are gone. in the old days before online brokers, you had to stay at a big firm (maybe buy stock after college graduation, do that first IRA rollover, and go from there) but now people are starting at discount brokers and getting sticky to them, rarely leaving. this is another way for MS to stick its claws into all types of clients, from the new employee who has $5,000 worth of stock all the way up to billionaires, it can be done at one firm. merrill was already there, but this move arguably puts morgan ahead.

etrade customers won't have higher fees, if they're smart, they'll keep etrade products the same pricing (you can make it up by giving clients shitty spreads on market orders, schwab does this all the time), they'll just increase the reach of MS's advisors, stuff like that. won't affect IB at all, won't affect MSIM at all, this is purely a play within wealth management/PWM.