Schwab to Acquire TD Ameritrade: What does it mean?

On November 24, 2019 Charles Schwab announced a definitive agreement to acquire TD Ameritrade.

Many of you know that TD is the custodian for client assets that we manage. As such, we thought you’d like to know our take on this announcement and what it may mean for us and our clients.

The role of a custodian is to safeguard client assets. They keep track of how many shares of stock or securities are held in each client account. They also take care of paying dividends, sending out statements, and supporting a website for clients to access their accounts. Typically, a custodian is not a money manager or investment advisor. From our point of view they play a critical but behind-the-scenes role for investors.

We’ve been using TD Ameritrade since we merged our practices in 2013 and have been very satisfied with their service. When we were evaluating custodians, TD offered many strong points, but their corporate culture was a good fit with our firm and that is what won us over.

We evaluated several other custodians including Pershing, NFS (Fidelity), and Schwab. At the time, Schwab did not have as strong a presence in New England and was viewed by many as the West Coast version of Fidelity—big and perhaps interested in larger advisory firms. Nevertheless, we have always had a very positive opinion of Schwab.

Having worked in three different large investment firms that went through mergers during my corporate career, I know that these types of big transactions can take a lot of time. As such, the real pros and cons for advisors and investors will not be known for some time.

Schwab and TD have indicated that the transaction will close in the second half of 2020. After that it often takes about two years to realign an organization and fully complete the back office systems integrations that will need to occur. This is a complicated process and delays are not uncommon.

When is this going to trickle down to advisors and investors?

I think we’ll start to see changes towards the end of 2022 or early 2023. That’s about three years from now which gives us plenty of time to understand what, if anything, is going to change and to prepare for it.

In the meantime, its business as usual.

Overall we think highly of Schwab and TD and believe that in time their combination may bring additional benefits to you and our firm. We’ll keep you posted.

Lyman H. Jackson
Lyman@PlanWithFPS.com
617-630-4978

For more information on the merger, go to https://www.amtd.com

Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.