Morgan Stanley’s $13 billion purchase of E*Trade Financial Corp. “shows how drastically the brokerage industry’s business model has changed,” writes columnist Jason Zweig in a recent Wall Street Journal article.

Zweig argues, “Firms no longer want to offer investment products from all sources. Instead, they want to milk their customers’ cash and manage all the assets themselves. Investors need to understand the rules of the new game.”

While Zweig notes that firms such as Schwab and Fidelity have succeeded at managing money while offering funds from other firms–a kind of one-stop-shopping—he argues that most have “flailed,” citing Prudential’s $1.5 billion regulatory fine paid due to “sales of risky partnerships.”

“Nowadays,” he writes, “the name of the game isn’t to offer all things from all sources to all investors. It’s to offer only what keeps the fees in-house.”

Zweig points out that, since technology has driven down trade commissions and firms can’t make the money they once did from managing portfolios (due to indexing and ETFs), brokerage firms are setting their sights on putting investor cash into their own banks, paying investors “peanuts” and keeping the profits earned from lending it out.

“Morgan Stanley, E*Trade and Schwab all own banks to which they route much of their customers’ cash,” writes Zweig, noting that in 2019 Schwab earned 61% of its total net revenues from the interest captured on those balances. Financial firms also invest money in funds they run themselves, Zweig explains, to “capture fees you would otherwise pay to somebody else.”

In conclusion, Zweig advises investors to ask the following questions to the “new Wall Street:”

• What are my financial advisers doing in-house that someone elsewhere could do cheaper or more safely?
• Where do my brokers put their own cash?
• Do my advisers buy structured products for themselves?
• Should I diversify not just my portfolio—but my financial advice?