Charles Schwab is set to buy TD Ameritrade for $26 billion, which could create a firm with some $5 trillion in client assets, according to a report from Fox Business.
The move comes as the brokerage business has been racing to cut commissions to zero — which both firms moved to do last month. It also comes on the heels of Schwab’s plan, announced in July, to spend $1.8 billion on USAA’s brokerage and managed portfolio accounts, which have some $90 billion in client assets.
Schwab, which has about $3.7 trillion in assets, and TD Ameritrade did not respond to requests for comment.
Since the pricing pressures started in early October, TD Ameritrade’s stock price had weakened by about 11%; today, it rose 24% to about $41.40 in pre-market trading.
Schwab and TD Ameritrade have said free trades are expected to reduce revenues, 3%-4% of net annual revenues for Schwab, 15%-16% of net revenues for TD Ameritrade.
But the move to zero commissions represents “huge savings” for advisors’ clients, making it a “huge deal,” according to industry recruiter and watcher Jon Henschen. “More clients will ask, ‘Why are we paying these ticket charges? Why not zero?’”