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Morgan Stanley Gets Thumbs-Up on E-Trade Deal: Report

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Details of the proposed merger presented by Morgan Stanley on Feb. 20, 2020.

Five weeks after Morgan Stanley said it planned to buy discount broker E-Trade for $13 billion,  the Justice Department’s antitrust unit has approved the deal, according to a Bloomberg report of March 27 that cited a person familiar with the matter.

The E-Trade merger could bring some $360 billion of client assets  to Morgan Stanley’s $2.7 trillion. (Both figures were reported at year-end 2019, so the current amounts are likely lower due to the market’s recent decline.)  A Morgan Stanley spokesperson declined to comment on the report.

The news comes about 10 days after the Justice Department said that — due to the coronavirus and its impact on government operations —  firms involved with mergers and acquisitions should add 30 days to their “deal timing agreements.”

Schwab Update

Meanwhile, Charles Schwab’s plan to buy TD Ameritrade for $26 billion and build an even larger firm is still under investigated by the Justice Department, Bloomberg reported. That deal involves two direct rivals in the RIA and discount retail brokerage space.

“In fact, Morgan Stanley acquisition of E*Trade and potential loss of E*Trade Advisor Services as a viable RIA custody competitor puts even MORE pressure on the #Schwabitrade deal,” tweeted popular blogger and planner Michael Kitces last month. “Only a coterie of small-RIA custody options left, and even fewer competitive choices for large RIAs.”

As for the RIA-custodian side of the Morgan Stanley deal, “E-Trade has a small RIA presence, so we will see if Morgan Stanley invests in the space and learns about it. But RIA custodial work was not ever the DNA of E-Trade,” Shirl Penney, CEO of Dynasty Financial Partners, explained after the deal was announced.

For its part, Schwab said last week that the TD Ameritrade deal and its associated regulatory process remain on track. “We don’t have any comment on the impact of the DOJ’s announced changes, nor have we made any change to our previously announced expectation that the deal will close sometime in the second half of the year,” according to a spokesperson.

The merger would unite about 14,000 of the country’s 20,000 RIAs, he says, adding that some of these 14,000 RIAs use more than one custodian.

As Michael Kitces of opined on Twitter April 1: “But [I] never really viewed E*Trade acquisition as implicating anti-trust issues. The RETAIL brokerage space is huge (not an anti-trust issue), and E*Trade was not a major player in the RIA custody space. #Schwabitrade is still another matter altogether…”


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