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Wall Street Goes ‘Where the Growth Is’ on Wealth Advice, Not 0%

Lananh Nguyen, Jenny Surane and Hannah Levitt
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Wall Street Goes ‘Where the Growth Is’ on Wealth Advice, Not 0%

(Bloomberg) -- The biggest U.S. lenders aren’t ruffled by the push among discount brokers to cut commissions to zero.

Wall Street firms from Bank of America Corp. to Morgan Stanley said they’re focused on longer-term client relationships instead of just boosting stock-trading activity. Discount brokers Charles Schwab Corp., TD Ameritrade Holding Corp. and E*Trade Financial Corp. announced this month that they would cut fees to trade U.S.-listed stocks, ETFs and options to zero, sending shares plunging and fueling speculation about potential mergers.

“We don’t focus on trying to drive a pure trading type of thing,” Bank of America Chief Executive Officer Brian Moynihan told analysts on Wednesday. “The $0 change won’t affect us much, largely because we frankly introduced it 13 years ago,” and about 87% of the company’s self-directed trading business is already done without commissions, he said.

For Morgan Stanley, commissions from buying and selling stocks represents a small portion of the firm’s wealth-management revenue, according to its chief, James Gorman. Instead, the firm sees more potential to expand its financial-advisory services to households worth $1 million to $10 million, as well as those with more than $10 million.

“That’s where the growth is,” Gorman told analysts Thursday. “That is where the advice fee is very fair and very reasonable.”

As brokerage shares fell after the free-trading announcements, analysts and industry participants speculated that some firms would come under pressure to merge or sell. At least one bank, Goldman Sachs Group Inc., said it’s not interested in buying.

“The discount brokerage area is not one that we’re particularly focused on,” Goldman Sachs Group Inc. Chief Executive David Solomon said Tuesday.

To contact the reporters on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net;Jenny Surane in New York at jsurane4@bloomberg.net;Hannah Levitt in New York at hlevitt@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Alan Mirabella

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