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Financial Planning > Trusts and Estates > Trust Planning

Schwab to Sell U.S. Trust Unit

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Charles Schwab Corp. announced Nov. 20 that it would sell its U.S. Trust unit to Bank of America for $3.3 billion in cash in a deal that should close in the second quarter of 2007, assuming it passes the necessary regulatory hurdles. Schwab said it would record a pre-tax gain of $1.9 billion on the sale, and that after-tax proceeds would amount to $2.5 billion.

When Schwab announced its deal to acquire U.S. Trust in January 2000 for $2.7 billion in stock, its strategy seemed clear: lower-net-worth and self-directed investors would be served by Schwab online and retail branches, the middle market would be referred to Schwab-affiliated RIAs, and the ultra HNW would migrate toward the 153-year-old wealth management firm, U.S. Trust.

From that time onward, however, many advisors doing business with Schwab saw U.S. Trust as a competitor, especially for clients with more than $1 million in assets. In a further irony, it was Bank of America to whom Chuck Schwab sold his company in 1983 before buying it back in 1987.

In announcing the deal to sell U.S. Trust, Chuck Schwab said that, “as a U.S. Trust client myself, with no intention to leave, this will be a real win for clients.” As for Schwab, he said the deal will “improve our overall profit margin and return on equity, and further sharpen our strategic focus on serving individual investors and independent investment advisors.”

Last month, Bank of America, the second largest commercial bank in the United States, rattled its rivals by announcing free stock trades for customers with $25,000 and more in deposits.


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