Will the roughly 7,000 RIAs custodying with TD Ameritrade stick with Charles Schwab following the firm's acquisition? Will they have to repaper accounts? Will they get the same service, better service or worse?
Questions such as these are swirling in the wake of Schwab’s announcement that it would buy rival TD Ameritrade for $26 billion — and they highlight the challenges as well as the stakes for the two companies and the thousands of advisors who use their services.
Schwab CEO Walt Bettinger reassured listeners on a webcast about the acquisition that combining the two platforms will be a good deal for RIAs. “I think that, as the dust settles, independent investment advisors will agree with that assessment,” he said, adding that the firm will meet with retail clients and RIAs to better understand their needs during the transition.
Should the combined firm suffer attrition, its effects would be modest, Bettinger said.
“You'd have to have quite significant RIA attrition to make up any meaningful percent of the revenue of the combined organizations, particularly in a post-zero-commission world,” Bettinger said on the call about the acquisition, which the company estimates will add 12 million client accounts and approximately $5 billion in annual revenue to the firm.
Though the deal is not set to close until the second half of 2020, it’s already spurred changes at TD: CEO Tim Hockey resigned effective immediately.
He will stay on in an advisory capacity until the end of February, according to a TD Ameritrade
Stephen Boyle, former CFO of the Omaha-based custodian, will serve as interim CEO, according to Schwab, which
It’s unclear what will happen to other key executives and staff at TD Ameritrade, but some of the firm’s 9,226 full-time employees will be cut as part of the acquisition, according to Schwab.
“Reductions in staff are a necessary part of achieving overall expense synergies,” reads a company statement on its
A TD Ameritrade spokeswoman provided the following statement:
“We believe that a large number of TD Ameritrade employees will continue on with Schwab post-integration, but there will likely also be many that do not. Decisions on staffing will be made as part of the integration planning process, which has not started yet. As we’ve demonstrated time and again, any impacted employees will be treated fairly and with the utmost dignity and respect. That said, we have a long way to go, and many steps to take, before the transaction can close and integration planning can begin. We have a strong company with talented employees, and we remain full steam ahead in delivering great experiences to our clients and each other.”
Boyle expressed enthusiasm for what lies ahead in combining the two companies.
”[TD Ameritrade and Schwab have] been strong competitors over time — and then pretty fierce competitors — but I think underlying that, there's just a lot of respect, and I think that we're going to be able to build a combined culture that's going to be even better, and we're really, really looking forward to that,” Boyle said on the call.
As part of the acquisition, the combined company’s corporate headquarters will be located in a new campus in Westlake, a suburb of Dallas-Fort Worth. Both companies have a “sizable presence” in that area, according to Schwab.
“Our expectation will be to continue to have a large presence in San Francisco, consistent with where we are today,” Schwab CFO Crawford said. He added that they will likely add a “more significant percentage of our staff,” to that location.
Planners who manage less than $100 million in client assets question their future at Schwab.
After the deal closes, a transition period will take about 18 to 36 months, according to Schwab, which named COO Joe Martinetto to oversee the integration. He will be assisted by a “team of experts” from Schwab and TD Ameritrade.
TD Bank, which currently owns 43% of TD Ameritrade’s common stock, will now own approximately 13% of the combined entity. The bank will name two new seats on Schwab’s Board of Directors, and TD Ameritrade will name a single director, according to Schwab.
It’s too early to tell what will be required of advisors as they transition books over to Schwab, Bettinger said.
“There may be some repapering required. There may be some circumstances where it's not required,” he says.
TD Ameritrade made a brief announcement to advisors about the acquisition, according to a Monday morning memo to advisors from Tom Nally and obtained by Financial Planning.
“We wanted to let you know that Charles Schwab and TD Ameritrade have reached an agreement for Schwab to acquire TD Ameritrade,” Nally wrote in the memo, which offered advisors a brief letter they could personalize and share with clients about the deal and pointed them to the website for more information.
If all advisors with TD Ameritrade do move over to Schwab, this doesn’t mean the company will end up with 7,000 more RIAs. There is “meaningful overlap” between RIA clients custodying between the two firms, according to Bettinger, who noted it was too early to specify exact numbers.
Bettinger noted that he anticipates the deal to give the company broader reach when marketing to breakaway advisors.
