First, a few facts: Charles Schwab’s final purchase price was$22 billion, $4 billion less than the figure announced on Nov.25, 2019. Shares of both companies dropped about 20% thisyear through Oct. 5, while the S&P 500 improved over 4% inthe same period.
As a combined entity, Schwab and TD Ameritrade — whichwill maintain separate broker-dealers for another 18 to 36months — have over $6 trillion in client assets. That puts itin the same league, although somewhat behind, Fidelity with$9 trillion ($3.5 trillion of which is in discretionary assets),BlackRock with $7.3 trillion and Vanguard with $6.6 trillion.
The total assets handled by Schwab and TD AmeritradeInstitutional’s registered investment advisor, or RIA, clientsis about $2.6 trillion — of which $1.9 trillion is at Schwab and$700 billion at TDAI.
Rival Fidelity Institutional had $3.2 trillion in assets underadministration for its dual clearing and custody clients as ofJune 30, including some large non-RIA clients such as banksand broker-dealers. It doesn’t report its assets by segment(such as advisory), but says it works with about 3,000 RIAfirms. BNY Mellon Pershing has about $850 billion in advisoryassets and roughly 725 RIA clients.
The Scene a Year Ago
When reports of a possible tie-up began to circulate on Nov. 21,2019, Carson Group CEO Ron Carson said he was not surprised“at all” by the development. “The profession is beginning torealize we don’t need 50,000 trading departments, researchdepartments, marketing departments or compliance departments,” Carson explained.
News of the possible brokerage megadeal came a week
after the Advisor Group network of broker-dealers moved to
buy rival Ladenburg Thalmann in a deal that involved up to
11,500 advisors and $450 billion in assets. The Schwab-TD
Ameritrade transaction “is the biggest deal of the year and
speaks volumes to how we’re on the eve of going from a tradi-
tionally inefficient industry to one that is more streamlined,”
Carson said a year ago.
“In general, the management of companies like these, often
led by some pessimistic CEOs, might look at the financial mar-
kets going forward and say, ‘It’s now or never. We won’t get a
better price if we wait,’” said recruiter and industry veteran
Jon Henschen last November. “It’s all market timing, as with
Advisor Group-Ladenburg, and profitability.”
Industry trends that added to costs and brought related
pressures meant “it was going to be a struggle for TD to stay
in the game,” Henschen explained. “So the options were to
sell now with the markets being ‘toppy’ or keep going with
hard-to-maintain profits. Then zero commission nipped it in
In its announcement on Nov. 25, 2019, Schwab said 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 yearly revenue as estimated at $17 billion with
pre-tax profits of $8 billion.
News of the biggest deal to hit financial services in decadescame just seven weeks after the main discount brokerage firmsdropped commissions to zero (in the fall of 2019).
It also occurred about two years after TD Ameritradewrapped up its purchase of rival Scottrade (on Sept. 18, 2017)and Tom Bradley — then head of both RIA and retail operations at TD Ameritrade — departed.
How the Schwab-TD Ameritrade Merger Happened: A Timeline
Toronto-Dominion Bank forms inCanada via a merger of Bank ofToronto (founded in 1855) andDominion Bank (founded in 1869;a U.S. office opened in 1919).
Schwab’s firm incorporatesas First Commander Corp.
Joe Ricketts and partners start investmentbanking firm Ameritrade in Omaha.
Charles Schwab and partners launchinvestment newsletter (“InvestmentIndicator”) in San Francisco.
Schwab buys all stock ofCommander Industries.
First Commander is renamedCharles Schwab & Co.
Rickets and partners openFirst Omaha Securities.
SEC bans practice of fixedbrokerage commissions.
Schwab starts discount-brokerage operations.
First Omaha Securities opens itsdoors as a discount brokerage firm.
Thomas Peterffy, now chairman ofInteractive Brokers Group, buys a seaton the American Stock Exchange andfocuses on equity options; he soonforms the T.P.& Co. and Timber Hill.