The low-interest-rate world has had many repercussions for financial companies. Brokerages and asset managers have been hurt by the change, as they typically derived a bulk of their profits from the "carry" on the funds they handled.
It's made these businesses less desirable. It's turned led to a wave of consolidation among asset managers as companies focus on gathering the most amount of funds. This is what tends to happen in industries with low-profit margins. These industries have also been pressured by no-cost and low-cost trading which has eroded commissions and low-cost ETFs that allow investors to track indices with minimal effort.
In the last couple of years, there have been numerous high-profile deals. In terms of overall market share, ETFs continue to take market share away from active managers. This has resulted in deals like Legg Mason
Morgan Stanley Buys Eaton Vance
Another major deal happened with Morgan Stanley
Morgan Stanley has been focused on growing its wealth management division. To this end, it also recently bought Etrade earlier this year for $13 billion, which gives it the ability to sell its asset management services. Morgan Stanley's CEO James Gorman also said that it was done doing any deals for the time being.
Stock Price Impact
Morgan Stanley's stock has underperformed the broader indices. However, it's done better than the vast majority of its peers. Wall Street-oriented banks like Morgan Stanley and Goldman Sachs
These stocks should continue to outperform within their sector and have an interesting upside given the increased likelihood that interest rates will keep declining.
