The acquisition - the largest deal by a Wall Street bank since the 2008 financial crisis - will see Morgan Stanley's wealth management unit add over 5.2 million client accounts and more than $360 billion of retail client assets, supplementing its traditional full service-advisor-driven model with E*Trade's direct-to-consumer, digitally-driven offering.

The move will also add E*Trade's US stock plan business to Morgan Stanley's Shareworks, helping the bank to push its workplace offering through online brokerage and banking capabilities.

James Gorman, CEO, Morgan Stanley, says: "E*Trade represents an extraordinary growth opportunity for our Wealth Management business and a leap forward in our Wealth Management strategy. The combination adds an iconic brand in the direct-to-consumer channel to our leading advisor-driven model, while also creating a premier Workplace Wealth provider for corporations and their employees."

E*Trade CEO Mike Pizzi will continue to run the unit.

Morgan Stanley has been keen to re-balance its portfolio, beefing up more durable areas such as wealth management to reduce reliance on less reliable income sources such as trading and investment banking.

For E*Trade, the acquisition comes after a tough few years in which it has struggled to see off fintech upstarts such as RobinHood. Last year it also got caught up in a price war initiated by Charles Schwab, which then struck a $26 billion deal to buy TD Ameritrade.

Under the terms of the agreement - slated to close in the fourth quarter - E*Trade stockholders will receive 1.0432 Morgan Stanley shares for each E*Trade share.