Axos Financial, a bank holding company based in San Diego, Calif., is buying E*Trade’s RIA custody business from Morgan Stanley for $55m in cash.
The transaction is expected to close in the third quarter of 2021. Axos will eventually provide custody for roughly $23bn in assets managed by 200 different RIAs.
Charles Schwab, the custodial industry’s heaviest hitter, had roughly $3.2tn in assets in its Schwab Advisor Services division at the end of the first quarter of 2021.
‘The addition of approximately 200 RIA custody relationships with $23 billion of combined assets under custody significantly accelerates our time-to-scale in this business,’ stated Greg Garrabrants, Axos Financial’s chief executive.
The deal is structured so that Axos Clearing, Axos Financial’s existing RIA custodian and introducing broker-dealer, will acquire ‘certain assets and liabilities related to E*Trade Advisor Services.’ Axos will also add Liberty, E*Trade’s end-to-end RIA technology platform, which includes tools for performance reporting and trading.
‘The RIA custody business is an integral part of our strategic plan, and adding a team of experts with decades of experience and relationships with the RIA community is something we highly value,’ Garrabrants said. ‘We look forward to investing in and growing the E*Trade Advisor Services team to support their high-touch service model.’
Other companies under the Axos Financial umbrella include Axos Bank — a bank with roughly $14.4bn in assets — and Axos Invest, a robo-advisor. The company’s bank specializes in online lending and does not have branches.
Morgan Stanley acquired E*Trade in October of 2020 in an all-stock deal that was initially valued at roughly $13bn. E*Trade sold itself to Morgan Stanley shortly after its chief executive, Mike Pizzi, said that the firm wanted to become an alternative for advisors dissatisfied with the custodial industry consolidation prompted by Schwab’s acquisition of TD Ameritrade.
Garrabrants, in his statement, touted that the acquisition of E*Trade’s RIA custody business will add roughly $1.2bn in client cash deposits, which he said ‘adds another potential source of low-cost funding and optionality for Axos Bank.’
Shares of Axos fell nearly 4% in Tuesday morning trading on the New York Stock Exchange.
This article originally appeared on Citywire.
