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Morgan Stanley’s Plans for E*Trade RIA Custody Business in Question

By Jonah A. Toleno, Partner of Shustak Reynolds & Partners, P.C. posted on Friday, August 28, 2020.

Earlier this year, Morgan Stanley announced plans to purchase E*Trade Financial Corp., with the deal scheduled to close by end of 2020.  The acquisition would include E*Trade’s $360 billion in assets, $18.2 billion of which is comprised of custody business for Registered Investment Advisors (RIAs).  Many wonder what Morgan Stanley, a global wirehouse firm with over 16,000 advisors who primarily engage in brokerage and commission-based business, plans to do with E*Trade’s RIA business.  Unlike other, independent brokerages, Morgan Stanley does not currently permit its advisors to operate on RIA platforms.  Some opine that acquiring E*Trade’s custody business could pose a direct competition with the deeply rooted culture of its brokerage business.  According to an article published in Investment News earlier this week, a Fox Business report in May intimated that Morgan Stanley was “exploring the idea of opening its own independent RIA business.”  But when Investment News contacted Morgan Stanley about the report, a spokesperson denied it.

As those in the securities and financial services industry are aware, the last decade has seen a huge exodus of advisors from traditional wirehouses to pursue independent, RIA, and hybrid business models.  Wells Fargo recently began permitting its advisors to engage in RIA business.  It will be interesting to see whether Morgan Stanley integrates E*Trade’s RIA custody assets into its model, with other wirehouse firms likely taking notes if it does.

Our firm specializes in counseling brokers, advisors, and firms on transition issues.  If you have a broker transition situation you’d like to discuss with us, give us a call at (619) 696-9500 and look us up at https://www.shufirm.com/.

Partner Jonah A. Toleno is based in our San Diego, California office.  She practices in securities and financial services law, including employment law.  She acts as trial counsel and outside corporate counsel for numerous financial, business, and individual clients.  She can be reached at (619) 696-9500 or [email protected] with questions.

 

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