Investing

Is E*Trade Safe? What Insurance Does It Have?

Aaron Webber

Published: May 20, 2024 1:00 pm

While most reputable financial institutions are required to be covered by one form of insurance or another, sometimes that isn’t enough to answer the question of whether that company is safe or not.

Answering that question involves considering a lot more information like company history, leadership, and what kinds of behavior the company routinely engages in. Knowing whether a company is safe is essential to feeling comfortable about your investments. That’s why we looked into E*Trade to review what insurance it has to protect its customers, and whether investing your money with E*Trade is a good idea. So, is E*Trade safe?

Why Are We Talking About This?

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Given the unreliable, corrupt, and devious nature of the American financial system, it’s natural to feel nervous and apprehensive about handing your money over to any broker or bank. The more information you have about a company or a particular investment, however, the better decisions you can make, and the fewer headaches you’ll create for yourself down the line. 

Background on E*Trade

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E*Trade is a primarily digital trading brokerage founded in 1991. At the time, trading on the stock market was expensive, slow, and confusing for regular people. Aspiring traders either had to deal with forms they had to fill in and mail to a broker, deal with a broker over the phone who would take massive commissions from each trade, or pay a significant fee to an asset manager who would invest their money for them. When online brokerages entered the market, suddenly people could invest in the stock market without having significant amounts of money to throw around. People could trade as a hobby.

This new influx of traders led to massive success for E*Trade and the company went public in 1996. It continued to grow for years, quickly becoming one of the most successful and preferred platforms for trading stock in the world. 

Then, mobile-first trading platforms began entering the market. These new traders appealed to new and younger traders with simpler designs, zero commissions, hugely reduced account fees, and no account minimums. Millions of customers, mostly millennials, flocked to these new platforms, trading for the first time. In order to remain competitive, E*Trade followed the example of many other large brokers and eliminated its commissions on stock trades, its account minimum requirements, and many of its fees. Today, you can buy and sell stock on E*Trade, among other actions, without paying any commissions.

In 2020, Morgan Stanley (NYSE:MS) acquired E*Trade and incorporated it into its online ecosystem of financial services. Now, E*Trade customers can also sign up for checking accounts, saving accounts, retirement plans, and many other services made possible by Morgan Stanley. Read our full review of E*Trade in our article here.

What Insurance Does E*Trade Have?

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Because E*Trade is owned by Morgan Stanley, it is also protected by any coverage Morgan Stanley has or will gain in the future. This includes a number of different insurance programs and guarantees depending on the type of account you may have. 

First, Morgan Stanley is covered by the Federal Deposit Insurance Corporation (FDIC). This covers all checking and savings accounts you have at both E*Trade and Morgan Stanley. The category of coverage is listed in detail on the FDIC website, but as an example: all checking accounts are insured up to an amount of $250,000 for each customer. Read more about E*Trade’s checking account here.

All savings accounts are insured through the FDIC up to values of $500,000 per customer. Read more about E*Trade’s Premium Savings Account here. All brokerage accounts are insured as well, up to a value of $500,000 for individual accounts and $1,000,000 for joint accounts. 

Second, Morgan Stanley is a member of the Securities Investor Protection Corporation (SIPC). This protection ensures investment accounts up to $500,000 per customer. However, Morgan Stanley also offers additional protection by raising the cap of protected assets up to a maximum of $1 billion for customer securities and $1.9 million for each client for any uninvested cash. 

Third, E*Trade operates under the Customer Protection Rule enforced by the U.S. Securities and Exchange Commission (SEC). This rule states simply that all assets managed by E*Trade are actually owned by the customer and are required to be kept separate from all other assets owned by E*Trade and Morgan Stanley. These managed assets cannot be used by Morgan Stanley to pay its bills in any case.

Finally, E*Trade guarantees all assets against unauthorized, illegal, and malicious access. Any assets lost or money stolen through unauthorized use of your account is not your responsibility. E*Trade also promises to never sell your personal information.

Is E*Trade Safe?

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E*Trade is no more or less safe than any large or institutional broker. Since most insurance and coverage are required by federal law, most other reputable companies are going to have the same coverage. In terms of stock market volatility, no company can protect you from a bad investment or from stock market crashes. Those are natural (in a debatable way) occurrences and an assumed risk of investing. Regarding account security, it is a safe place to keep your money, but online security is only as good as you allow it to be. No amount of security can protect you from bad internet etiquette. Practice prudent online behavior and you will be fine. 

If you’re curious about any other part of the E*Trade platform, check out this page: a regularly updated list of all our E*Trade guides, news coverage, and lists of benefits.