What's going on?

Investment bank Morgan Stanley announced one small, $13 billion step of buying online brokerage E*TRADE, in hopes it�ll be one giant �leap forward� for its business.

What does this mean?

Since 2008�s financial crisis, some of the riskier aspects of investment banking � like trading � have lost their luster. That�s why lots of banks have spent the last few years diversifying their businesses in search of stable, recurring revenues. Goldman Sachs, for instance, is trying to become a consumer bank, while JP Morgan is experimenting with payments.

For Morgan Stanley, wealth management is the name of the game: the segment � which invests rich people�s money on their behalf � now accounts for almost half the firm�s revenue. But there�s money to be made in catering to the not-quite-so-rich, too. Hence E*TRADE: its five million customers and $360 billion worth of assets mean Morgan Stanley will soon manage over $3.1 trillion for wealth management clients. That could help give the bank an edge over its peers, sure, but it�s already helped E*TRADE�s investors either way: they�ll receive a payout worth 30% more than the firm�s shares cost before the deal was announced.

Why should I care?

For markets: Engage corp speed.
There�s more to E*TRADE than just an eye-catching wealth management service: the brokerage has a big employee stock management business too. In other words, when workers get paid in stock, E*TRADE looks after it � before hopefully converting those workers into brokerage customers further down the line. Morgan Stanley already owns a similar business, so with E*TRADE�s extra oomph, it�ll now boast 4,000 corporate customers.

Zooming out: Phew.
For E*TRADE�s investors, the deal will likely come as a relief. The company�s been in turmoil ever since Charles Schwab instigated a commission price war. Years of low interest rates haven�t helped either: E*TRADE makes 67% of its revenue from investing customers� cash. Being part of something bigger, then, really could be better.