Schwab Advisor Services introducesAlternative Investment Marketplace,which includes access to third-partyplatform sponsors that offer private funds.
Schwab says it will eliminatecommissions for trades ofstocks, ETFs and options.
TD Ameritrade CEO Tim Hockeysays he will step down in early 2020.
Later, TD Ameritrade makesa similar announcement.
Oct. 24 Oct. 1 July 22
Unofficial news starts to circulate abouta possible Schwab-TD Ameritrademerger, nicknamed “Schwabitrade.”
E-Trade says it also will drop commissions.
Fidelity moves to zero commissions,says it will put retail investors’ cashinto higher yielding alternativesavailable for new accounts andrequire zero payment for order flowfor stock and ETF trades.
TD Ameritrade names CFO StephenBoyle its interim president and CEO.
Schwab makes an official announcementabout its planned $26 billion purchase ofTD Ameritrade.
Schwab strikes deal to acquireassets of USAA InvestmentManagement Company.
Interactive Brokers announces thatit will let investors trade stocks andETFs without commissions withIBKR Lite, following earlier moves byonline brokerages like Robinhood.
are too low. If you think about where the incentive is for the
custodians, they’re not making money on [cash sweep] money
like they used to. And they’re not making money on trading
like they used to.”
Schwab derived nearly 60% of its total net revenues in the
first half of 2020 from net interest income. NII totalled about $3
billion in the six-month period (down 10% from the same peri-
od in 2019), while overall revenues were roughly $5.1 billion.
At TD Ameritrade, net interest income in the first sixmonths of 2020 was $635 million, accounting for about 20% ofits $3.1 billion of total revenue. Its NII dropped about 15% fromthe prior year during this period.
With NII and trading revenues down, it’s possible that somecustodians might ask RIAs clients to pay three basis points, forinstance, to cover costs tied to a surprise audit. “They couldsay, ‘You’ve got to pay for a cyber security audit [and for] usingall the vendors we’ve approved … ,’” he explained.
For RIAs, “all these costs become a burden that forces con-
solidation,” Mallouk said. It’s happened in other industries
“very, very fast, and we’re going to see something similar hap-
Plus, investors are being given plenty of technology-based
platform options, putting further pressure on RIA firms.
“That’s just another squeeze on the middle market on top of
everything else that’s squeezing them to begin with,” noted the
president of Creative Planning, which has about $55 billion of
Thus, the industry “will see all of these forces conspiretogether to accelerate what we’re already seeing, which issome consolidation — eventually followed by more and moremarket share moving to the larger firms,” he explained.
At present, about 50 RIA firms “out of thousands and thou-
sands control the majority of assets,” according to the Creative
Planning executive, and that situation “is going to change even
more … at an accelerated pace” going forward.
As RIAs get “further squeezed in the middle,” it pays to be afirm that “really knows your clients and has done plans for allof them, knows a lot about their [particular] situations” and soforth,” he added.
As for the large brokerage firms, such as the wirehouses,moving into the RIA space, “They’re eventually just goingto all have their own platforms to capture those [breakawayadvisors] and have them in their own RIA-type model,”Mallouk said.
The lines separating the two business models “are going to
continue to be blurred,” he pointed out. “The only thing that
makes an RIA different from a brokerage house is laws and
regulations, and those are always changing. So we can have a
change that makes us all the same at any point in the future
As Mallouk was being interviewed about shifts in the RIA
industry by Investment Advisor (on Sept. 28), Raymond James
announced the consolidation of its custody and clearing
unit and its investment advisor channel into the new RIA &
Custody Services Division.
“Why are they doing that? Because of expected growthin independent RIA and breakaway advisors,” he remarked.“You’re seeing this unfold in real time.”
—Jeff Berman contributed to this report.
Janet Levaux is editor-in-chief of Investment Advisor. She can be reached firstname.lastname@example.org.