Although the merger between Schwab and TD Ameritrade is still expected to close in the second half of this year, integration between the two companies is expected to take 2-3 years to complete, according to TD Ameritrade Institutional President Tom Nally.
“This is a large deal and combining these two firms is going to take time — especially if you want to do it right, and that’s what we’re focused on,” he told more than 3,200 RIAs and others attending TD Ameritrade’s National LINC 2020 conference in Orlando, Florida, on Thursday.
“We’re playing the long game,” he said, adding: “We’re not looking to put quick wins up on the board. We’re looking to be very thoughtful and very methodical about how we do this to bring both of these organizations together.”
Nally still expects Schwab’s acquisition to close in the second half of this year, despite the close scrutiny the deal is getting from the government, he told attendees.
Nally pointed to an 8-K filing with the Securities and Exchange Commission made by his company Wednesday that disclosed the companies each received a request for additional information and documentary material from the Antitrust Division of the Department of Justice.
“This is not a surprise to us,” he said of the second request. “We knew that this was highly likely, but we don’t anticipate that it’s going to slow the deal down from ultimately closing in the second half of this year,” he told attendees. After all, it’s common for the DOJ to “really do their homework” and request additional information about a major deal of this size, especially because this is the “first time the DOJ is actually examining our industry,” so their investigators have to learn how the industry functions, he said.
“For the time being, we’re continuing to operate business as usual,” he noted. Even after the deal closes, however, we’re “looking at probably another two to three years before the full integration actually takes place,” he said, adding: “Until then, we fully intend to remain a company that you want to work with, a company that you can trust with your clients, with your assets and with your business.”
In the meantime, TD Ameritrade is “not slowing down” — it’s “continuing full steam ahead, with all of our efforts to help you deliver the best experience to your clients,” he told RIAs.
When it comes to many of the big questions surrounding the merger, the firm itself doesn’t “have a lot of answers because we’re so early in the game here,” he said. “Integration planning is really just beginning [and] we haven’t been able to make any key decisions yet or even start to do the analysis around the decisions” that need to be made, he noted.
The Fate of Veo One
“We are certainly sensitive to concerns around service disruption,” he said, but promised the two companies are “equally committed to a smooth transition — we do want to get it done right.”
As of now, “we don’t know” the fate of TD’s Veo One next-generation advisor platform after the merger is completed, he conceded. But, for now, the company is continuing to invest in its technology platforms and “working on what we believe will be the best path forward,” he said. One thing that’s certain, however, is that the legacy Veo platform has served the firm well, but it’s 15 years old and does “need to be retired,” he said.
The firm told advisors it will complete the process of upgrading all firms to Veo One and, “to make the transition as smooth as possible, advisors will make the move to the next-generation platform in waves over the coming year.” That breathing room will give them time to become more familiar with Veo One’s features, functionality and improved ease of use, it said.
Based on feedback from advisors, Veo One alerts have been enhanced with several new features that the company said makes it easier to group, sort, filter and export alerts. TD helped streamline and simplify the process of creating and submitting a management fee invoice for processing, while the Veo One Message Center has been “upgraded to leverage newer technologies for an improved user experience,” the company said.
This summer, the firm will introduce a new digital marketing dashboard that will help advisors measure and improve the effectiveness of their web presence and social media activity, it noted.
No Repapering Required
One piece of good news that drew applause from the audience Thursday was Nally’s announcement that, “for the vast majority of accounts, you will not have to repaper” as a result of the merger. Noting that he’s been through about eight deals with TD Ameritrade, Nally said he never saw the firm having to repaper because “everything gets done through negative consent.”
The company is “going to try and do as much of this as we possibly can electronically, so we don’t have to stuff your clients’ mailboxes with paper,” although it would be helpful if advisors could get their clients to sign up for digital document delivery, he told them.
Meanwhile, Nally also took the opportunity to point to continued RIA growth across the industry, noting RIA assets tripled in the past 10 years, supported by S&P 500 growth.
According to the new TD Ameritrade Institutional 2020 Break Away to Independence Survey, 55% of potential breakaway brokers — those at national, regional firms or independent broker-dealers considering a move to independence within three years — indicated they will make their move within the next 12 months. That’s up 11 percentage points from the 44% who expressed the same sentiment in the spring 2019 survey, the company said. Also, 47% said they felt even more strongly about becoming independent now than they did last spring, according to the study.
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