Charles Schwab’s reported move to purchase TD Ameritrade for $26 billion, reported early Thursday, is the talk of the industry and shouldn’t come as a surprise, industry watchers and advisors say.
“It’s big news, as yet another example of the massive consolidation taking place in financial services,” said Vance Barse, wealth strategist and founder of the firm Your Dedicated Fiduciary.
But don’t bet on the merger just yet, some say.
“There are some potential antitrust issues,” according to Joel Bruckenstein, a certified financial planner and head of T3 Technology Hub. “These two firms have been fierce competitors for years on the advisor and consumer side. Will there still be sufficient competition if they merge? It is difficult to know how regulators will view this.”
Analysts with Keefe, Bruyette & Woods say Schwab has an estimated 50% market share as an RIA custodian, while TD Ameritrade has roughly 15%-20%. Fidelity, which is privately held, has about 25%.
“We think this deal may face somewhat significant antitrust hurdles, depending on how the competitive market is viewed by relevant authorities,” said KBW’s Kyle K. Voigt and Matthew Moon in a research note on Thursday.
Talk of the merger, which could create a firm with some $5 trillion in client assets, is still unconfirmed by both parties. The report comes a week after the Advisor Group network of broker-dealers moved to buy rival Ladenburg Thalmann in a deal that unites up to 11,500 advisors and $450 billion in assets. (Fox Business broke the story early Thursday).
“We hear it over and over again at industry conferences, especially in terms of consolidation continuing for RIAs and independent practices,” Barse said. “It’s happening now and getting faster. It’s time to embrace [it] as the new normal for the foreseeable future.”
Carson Group CEO Ron Carson concurs with Barse and is not surprised “at all” by the news.
“The profession is beginning to realize we don’t need 50,000 trading departments, research departments, marketing departments or compliance departments,” he said. “It’s the biggest deal of the year and speaks volumes to how we’re on the eve of going from a traditionally inefficient industry to one that is more streamlined.”