Morgan Stanley Purchases E*Trade

Morgan Stanley just purchased E*Trade for $13B in an all stock offering. Which I believe is a bit overpriced, but overall a huge win for Morgan. Here’s what I would expect to see as a result of the deal:

- A bigger push towards their “Access Investing” or their version of a robo.

- A tiptoe approach into the shallow end of retail banking (loans, credit cards, deposits etc.) to compete with Goldman and JPM.

- A physical retail presence, which will be a real first for Morgan, by converting current E*Trade locations into banking and investment centers.

- A new and separate financial advisor program not tied to servicing the wealthy, but instead to accounts sub $250K.

Potential issue: E*Trade customers are primarily Do-it-Yourselfers and many have been loyal since the dot com era. Will they buy into the Morgan system or take their trading elsewhere? How long will Morgan leave the current system untouched?

The stock dipped 4.5% (as a result of the dilution in shares and minor selloff) on the announcement.