Why Morgan Stanley is buying E-Trade

The Wall Street investment back is chasing the middle class

Morgan Stanley.
(Image credit: Stephen Chernin/Getty Images)

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You don't need millions in the bank to become a client at Morgan Stanley anymore, said Greg Iacurci at CNBC — all you need to have now is an E-Trade account. Last week the Wall Street investment bank agreed on a $13 billion purchase of the discount brokerage. E-Trade, with 5.2 million customers, was once a revolutionary platform that "helped usher in a dramatic shift among financial services firms" and fueled the rise of indexes and exchange-traded funds, making investing vastly easier for do-it-yourself investors. If approved, the deal — "the biggest bank takeover since the 2008 financial crisis" — would put Morgan's blue-chip "financial advice at the fingertips of a population that hadn't previously had access." For Morgan, these new customers are a chance to "steady the ship," said The Economist. A decade ago, two-thirds of Morgan's profits came out of buying and selling securities. That high-stakes strategy produces "large, lumpy sums when markets are strong," but it's not a dependable source of revenue. Wealth management actually brought in more money last year, and Morgan is betting that IT will become "the bank's main business."

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