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Industry Spotlight > RIAs

Schwab Officially Strikes Deal to Buy TD Ameritrade

By Janet Levaux

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Charles Schwab announced it is buying rival TD Ameritrade for $26 billion in an all-stock transaction. It made the announcement early Monday, four days after reports that the two discount brokerage firms were in merger talks. 

In addition, TD Ameritrade has suspended its CEO search and named CFO Stephen Boyle as interim president and CEO, replacing Tim Hockey. Several months ago, Hockey said he planned to leave the firm; he will act as an advisor to Boyle through Feb. 28, 2020.

“A new chapter for me…best of luck to my colleagues @TDAmeritrade,” Hockey said on Twitter. “Life is like a bike trip. There are many twists and turns. The idea is to enjoy the ride…and as Einstein said, you only stay upright if you keep moving forward!”

The deal potentially unites more than 14,000 RIAs, some $5.1 trillion in investor and advisory assets, and 24 million accounts. The two firms’ combined revenue is estimated at $17 billion with pre-tax profits of $8 billion.

Toronto-Dominion Bank, which now owns some 43% of TD Ameritrade common stock, is expected to own roughly 13% of the new company; its voting stake will be capped at 9.9%. Other TD Ameritrade stockholders and current Schwab shareholders should then own about 18% and 69%, respectively. 

Once approved — the deal faces antitrust and other hurdles — the new entity aims to “capitalize on the unique opportunity to build a firm with the soul of a challenger and the resources of a large financial services institution,” Schwab President and CEO Walt Bettinger said in a statement on Monday. 

As for RIAs, “I see two camps forming,” said Gavin Spitzner, president of Wealth Consulting Partners. “One, for those now with TD Ameritrade expressly not to be with Schwab, will use this as a reason to migrate away to an established firm or potentially an upstart like Altruist.”

The second camp could see the combination as having extra resources to invest in innovation and “doesn’t care about the competitive angle of their custodian competing alongside them in the wealth business and might grumble but will stay,” Spitzner explained. “Most interesting will be the ripple effects and who acquires or merges with who coming out of this.”

As to how the deal came to be — following on the heels of Schwab’s and TD Ameritrade’s move to zero commissions on trades — George Papadopoulas, an RIA, said on Twitter: “Lets face it, Schwab is a hell of a competitor! They managed to flat out corner TD Ameritrade whose executive team could not manage to transition the company away from relying so much on trading commissions. And then they went for the kill!”

– See Schwab-TD Ameritrade Deal Is No Sure Thing on ThinkAdvisor; and Why Schwab-TD Deal Is All About Assets First, Advisors Second 

Janet Levaux

@Think_JanetL

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