Morgan Stanley is to buy popular online stockbroker ETrade for $13bn in the largest acquisition by a multinational bank since the financial crisis.
According to the Wall Street Journal, the consolidation will give Morgan Stanley an inroad with ETrade 's 5.2 million retail investors. The bank is targeting this market to tap into a new source of revenue: the smaller-volume trades of the country's so-called mass affluent, people who are wealthy enough to have some savings but not rich enough to buy into hedge funds or seek out a money manager.
Morgan Stanley described ETrade clients as a "pipeline of emerging wealth".
[This deal is an] extraordinary growth opportunity"
The deal also comes as rival Goldman Sachs chases American consumers with its mass market wealth management business and online bank.
The purchase, which needs approval from regulators, will boost Morgan Stanley's wealth management business, a unit that chief James Gorman has been trying to bolster to insulate the bank from weak periods for trading and investment banking.
"This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasising more durable sources of revenue," James Gorman, the CEO of Morgan Stanley, said in a statement.
Gorman called the deal "an extraordinary growth opportunity".
The deal, if completed, would mean that America's stockbroking industry will consolidate further amid intense competition between rivals, with big brokers slashing their trading fees to zero last year. It would also mark another foray by a "pure play" Wall Street bank into the retail sector.
It may also bring the wealth management giant closer to cryptocurrency markets. ETrade reportedly considered launching a bitcoin and ether trading platform in April 2019. That service could now get wrapped into Morgan Stanley.