E*Trade announced on Tuesday that it is eliminating commissions and early redemption fees for all mutual funds traded on its platform, according to the firm’s owner, Morgan Stanley. The move reflects the trend toward zero-commission trading on other platforms and also reflects the continued evolution of Morgan Stanley and its business since it acquired E*Trade two years ago.

The elimination of fund commissions will affect more than 2,000 mutual funds, including popular items like the Fidelity 500 Index Fund and the Dodge & Cox International Stock Fund, according to a Morgan Stanley spokesman. The change goes into effect on trades made on or after December 12. 

Since its purchase two years ago, E*Trade is now known as E*Trade from Morgan Stanley.

Even though there is a growing interest in different products such as exchange-traded funds with passive mandates, Morgan Stanley says mutual funds still have value. By dropping fees, the firm can offer something to retail investors that other firms are not yet providing, said Chad Turner, head of Morgan Stanley Wealth Management’s digital direct business.

“Mutual funds offer clients a way to diversify their portfolio with a professionally managed offering,” he said in an email. “While interest in passive investing has risen over the years, there remains a real need for active management, and mutual funds can fit that bill for clients.”

“E*Trade has a long history of being an innovator in the industry, and we are proud to be able to advance this narrative even further as part of Morgan Stanley,” he said.

Morgan Stanley’s move to include 2,000 of its more popular funds on the zero-commission platform follows similar moves by many of its major competitors. Three years ago, Charles Schwab famously stopped charging a commission for online trading. TD Ameritrade responded in kind immediately afterward. This followed on the heels of J.P. Morgan Chase and Vanguard also offering online commission-free options. 

The Morgan Stanley move is also one of the latest to blend its operations with E*Trade since the two companies completed their pairing in October 2022.

Morgan Stanley announced its agreement to buy the New York-based E*Trade in February 2020. Once seen as a blue-chip firm for institutions or only the wealthiest individuals, Morgan Stanley struck the deal in an attempt to create its own version of a comprehensive, one-stop shopping supermarket for individuals during all phases of their financial lives. As a discount broker, E*Trade appealed to a very different clientele than those traditionally targeted by its new owner.

Since the merger, the two have been joining their services and putting aspects of Morgan Stanley’s business into E*Trade. The move to drop the fees is just the latest, Turner said in a statement.

Before this, Morgan Stanley offered E*Trade customers access to global research, including quarterly mutual fund commentary, at no cost. Before the acquisition, E*Trade offered initial public offerings, but now that it is part of Morgan Stanley, the access for clients has increased.

The most recent melding of services involved moving Morgan Stanley’s robo-advisor, called Access Investing, onto E*Trade so the latter can use Morgan Stanley’s Global Investment Office’s intellectual capital and market analysis.

E*Trade from Morgan Stanley now offers more than 6,500 commission-free mutual funds alongside its U.S.-listed stocks, ETFs and options trades.

Those interested in investing in mutual funds on the E*Trade platform can use the Fund Screener, which helps match investors with the type of fund that aligns best with their goals and investment strategies.

(Clarification: An earlier version of this story implied that E*Trade did not previously offer IPOs. The story should have also stated that the eliminated fees and commissions were designed for retail investors, not specifically advisors.)