Page 3 - Investment Advisor June 2021

06.21

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Where Is the Seismic Shift Following the Schwab-TD Ameritrade Deal?

Last October, Charles Schwab com- brokers have become powerful providers Merger Headaches?
pleted the acquisition of TD Ameritrade. of advice, playing in the same sandbox as Service issues are just one of a handful of
The consolidation of two of the biggest the advisors whose assets they custody. problems that can arise during a merger. As
firms in the industry has departments consolidate
hinted at a seismic shift and executive teams merge,
in the industry landscape. there are going to be plenty
What’s next? of advisors at both firms
It’s important to look that start to think about
at the merger and other moving elsewhere. Whether
changes through two it is a lack of resources,
lenses: how it affects the technology changes,
industry and how advi- unfamiliarity with leader-
sors will be affected as ship, change in employee
they seek to control their structure or the many small
own destiny. The custo- changes that come with the
dial industry has seen an territory, these are unavoid-
increase in consolidation, able factors that may arise
mergers and new firms over time.
entering the space. These changes, which Advertising dollars to pay for their On top of that, advisors need to
will take years before they make their full advice model must come from some- strongly consider how they are diver-
impact, will always have the biggest effect where, and advisors are helping to foot sifying their clients’ assets. Advisors
on the advisors that use the custodian. that bill. These big-box custodians say have long preached not “putting all my
Over the last 30 years advisors have that providing advice was unavoidable — eggs in one basket,” so those who have
gravitated toward one of the big four, soon it is what they must do to compete in the custodied with both Schwab and TD
to be three, major firms: Schwab, Fidelity, marketplace and enhance shareholder Ameritrade will now need to actively
TD Ameritrade and Pershing Advisor value. This concept has been discussed investigate an alternate custodian.
Solutions. The services of these big firms before, but recently, advisors have been As an independent custodian, we have
have become largely commoditized, each pushing back on custodians, particularly seen plenty of movement as a result of
offering the necessary core technology, in light of the disruption in the business. marketplace disruption and we expect
holding a wide range of standard invest- Right now, there is simply more choice in this trend to continue throughout 2021
ment assets, facilitating the advisor’s billing the marketplace. and beyond. This as an excellent oppor-
and doing it for an increasingly lower cost. In the case of Schwab and TD tunity for smaller, more nimble and
After selecting a custodian, the goal of Ameritrade, the full impact of that merg- creative custodians to capitalize on an
an advisor is to focus on the most impor- er has yet to come to fruition. From our influx of new business opportunities. This
tant brand: their own. Their business experience, these mergers always take is also a great time for advisors to break
priorities are to serve their clients to the time. Nothing really changes at first and free from the gravitational pull of these
best of their ability and build the firm’s advisors go about their business as usual. big-box custodians.
brand reputation within their community. Their focus does not shift away from There are options on the market out-
Unfortunately, the big-box custodians their clients. However, if one of these side of the new big three, and advisors
should take the time to explore their
firms already is providing spotty service,
have something else in common with each
Adobe Stock other and the RIAs they are serving. They these problems may be exacerbated as options in an effort to control their own
destiny. —Sean Gultig and Mark Avers
the merger progresses and can become a
have been building their own powerful
of Equity Advisor Solutions.
advice brands. Slowly but surely, discount
painful problem for the advisor.
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JUNE 2021 INVESTMENT ADVISOR 1