In late February Morgan Stanley bought E*Trade for stock and Morgan Stanley’s CEO James Gorman believed it was a very good deal for both companies. The value of the acquisition is $13 billion. The deal adds to the wealth division of Morgan Stanley which for over 100 years has managed funds for institutions and individuals with over $10 million in assets. E*Trade needs considerably less to open an account, however Mr. Gorman sees possiblities.
E*Trade typically caters to individuals who hope to have over $10 million in assets, but are at E*Trade for the desire to save commission fees. Typically most customers do their own stock trading or purchasing various ETFs and Mutual Funds. However as the assets grow, the need to turn to advise is necessary. Mr. Gorman believes there will be cross usage of the platforms and both sides will benefit.
The added benefit of E*Trade is Morgan Stanley tends to be more conservative company, while E*Trade has to maintain and enhance the trends in society. Mr. Gorman is hoping some of the creativity will rub off on Morgan.
Linking to dividend paying stocks, part of the rational Mr. Gorman bought E*Trade is to ensure revenues do not fluctuate as much as they had in the past. If government and corporations are doing less or the fees become less, retail clients can make up the fees – in one sort or the other. For dividend investors, we like revenues being stabilized in good and bad times. How does your investments in company’s ensure revenues flow through all the economic cycles?
There are more questions than answers, till the next time – to raising questions.