One of the largest upheavals in the brokerage sector in recent years is the Morgan Stanley acquisition of E*TRADE. But it’s not exactly a surprise. One of the major trends currently influencing the industry is mergers and acquisitions, and this trend is probably here to stay for the foreseeable future.
However, a merger of this magnitude may have a profound effect on the sector, affecting advisers as well as clients.
Yes, JP Morgan acquired E*TRADE in a $13 billion deal that closed on July 20, 2020 This acquisition was a major event in the financial industry, as it created one of the largest online brokerages in the United States
What Does the JP Morgan and E*TRADE Merger Mean for Advisors?
The JP Morgan and E*TRADE merger has several implications for advisors, including:
- Increased competition: The merger creates a larger and more formidable competitor for other online brokerages. This could lead to increased competition in the industry, which could benefit investors by driving down fees and improving services.
- More products and services: JP Morgan has a wider range of products and services than E*TRADE, so advisors will now have access to a broader selection of offerings for their clients. This could include things like investment banking, wealth management, and private banking.
- Changes to the E*TRADE platform: JP Morgan has announced plans to integrate the E*TRADE platform into its own platform. This could lead to changes in the way advisors use the platform, and they may need to learn new features and functionalities.
- Uncertainty about the future of E*TRADE Advisor Services: JP Morgan has not yet announced its plans for E*TRADE Advisor Services, which is a popular platform for independent RIAs. This has led to some uncertainty about the future of the platform.
What are the Potential Benefits of the JP Morgan and E*TRADE Merger?
The JP Morgan and E*TRADE merger could have several potential benefits for advisors, including:
- Access to a wider range of products and services: As mentioned above, JP Morgan has a wider range of products and services than E*TRADE, so advisors will now have access to a broader selection of offerings for their clients.
- More resources and support: JP Morgan is a much larger company than E*TRADE, so advisors can expect to have access to more resources and support. This could include things like dedicated account managers, training programs, and marketing materials.
- Greater brand recognition: JP Morgan is a well-known and respected brand in the financial industry. This could help advisors attract new clients and build their businesses.
What are the Potential Challenges of the JP Morgan and E*TRADE Merger?
The JP Morgan and E*TRADE merger could also present some challenges for advisors, including:
- Increased competition: As mentioned above, the merger creates a larger and more formidable competitor for other online brokerages. This could lead to increased competition in the industry, which could make it more difficult for advisors to attract and retain clients.
- Changes to the E*TRADE platform: Advisors may need to learn new features and functionalities as the E*TRADE platform is integrated into JP Morgan’s platform. This could be disruptive to their workflows and require additional training.
- Uncertainty about the future of E*TRADE Advisor Services: As mentioned above, JP Morgan has not yet announced its plans for E*TRADE Advisor Services. This has led to some uncertainty about the future of the platform, which could make it difficult for advisors to plan for the future.
What Should Advisors Do in Response to the JP Morgan and E*TRADE Merger?
Advisors should take several steps in response to the JP Morgan and E*TRADE merger, including:
- Stay informed: Advisors should stay up-to-date on the latest news and developments related to the merger. This will help them understand the potential impact on their business and make informed decisions.
- Evaluate their options: Advisors should evaluate their options and decide how they want to respond to the merger. This could include things like switching to a different platform, expanding their service offerings, or focusing on a niche market.
- Communicate with their clients: Advisors should communicate with their clients about the merger and how it will impact them. This will help to manage their expectations and ensure that they are comfortable with the changes.
The JP Morgan and E*TRADE merger is a significant event in the financial industry and it will have a major impact on advisors. Advisors should stay informed about the latest developments and evaluate their options to make sure they are prepared for the changes ahead.
Frequently Asked Questions
What is the difference between JP Morgan and E*TRADE?
JP Morgan is a large, full-service investment bank, while ETRADE is an online brokerage firm. JP Morgan offers a wider range of products and services, including investment banking, wealth management, and private banking. ETRADE focuses on providing online brokerage services, such as stock trading, options trading, and mutual funds.
What are the benefits of the JP Morgan and E*TRADE merger?
The merger creates a larger and more formidable competitor for other online brokerages, which could lead to increased competition in the industry and benefit investors by driving down fees and improving services. JP Morgan also has a wider range of products and services than E*TRADE, so advisors will now have access to a broader selection of offerings for their clients.
What are the challenges of the JP Morgan and E*TRADE merger?
The merger could lead to increased competition in the industry, which could make it more difficult for advisors to attract and retain clients. Advisors may also need to learn new features and functionalities as the ETRADE platform is integrated into JP Morgan’s platform. Additionally, there is some uncertainty about the future of ETRADE Advisor Services, which could make it difficult for advisors to plan for the future.
What should advisors do in response to the JP Morgan and E*TRADE merger?
Advisors should stay informed about the latest news and developments related to the merger, evaluate their options, and communicate with their clients about the merger and how it will impact them.
Additional Resources
What the Merger Means for Advisors
The founder of XY Planning, Michael Kitces, believes the merger is likely to have significant implications for RIA custodial platforms and could result in the dissolution of E*TRADE’s RIA platform for small firms, even though consolidation may offer more comprehensive solutions for clients.
“[The] 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,” Kitces said in a series of tweets after the announcement. He also emphasized that there are, “Only a coterie of small-RIA custody options left, and even fewer competitive choices for large RIAs.
This is particularly important because a small number of major companies control the majority of the custodial market, and further consolidation may reduce the options available to RIAs in the future. Although fidelity, Pershing, Charles Schwab, and Ameritrade own 80% of the assets of the RIA firm, E*TRADE has established a name for itself in the custodial space in recent years, primarily as a result of its 2017 acquisition of Trust Company of America. This could change as a result of the merger with Morgan Stanley, further reducing the pool of custodians.
Kitces thinks the merger is the result of the ongoing effects of last year’s race to zero commissions, though the full impact is still unclear. As such, it might just be the beginning of several ongoing changes in the sector.
The Changing Financial Landscape
Jennifer Butler, director of asset management and brokerage research at Corporate Insight, says that Morgan Stanley’s acquisition of E*TRADE “reflects the broader trend toward industry consolidation and the attempts we see across many financial institutions to serve the full range of customer segments.”
In line with that trend, businesses are searching for methods to broaden the scope of services they offer while catering to a more diverse clientele. %20%E2%80%9C According to Butler, the goal is to offer holistic financial management, which gives the company a complete picture of its clients’ assets and guarantees that money stays within the company’s ecosystem. Of the investors polled, 6% agreed that they would prefer to keep all (or almost all) of their financial accounts with their primary brokerage firm.