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.