Schwab-TD Ameritrade Deal Creates New 'RIA-lity'

Charles Schwab completed its $22 billion purchase of TD Ameritrade on Oct. 6, 2020 (Images: Shutterstock; design: ALM/Chris Nicholls)

On the day of the mega-deal’s completion, Bernie Clark — head of Advisor Services for Schwab — described the transaction’s significance as being “really huge.”

It could be viewed as “the biggest thing we’ve seen happening in this space, in bringing great companies together with like-minded approaches to their clients and an opportunity for all investors,” Clark said on Oct. 6.

The combined brokerage firm has over $6 trillion in client assets. In June, the combined assets handled by their registered investment advisor, or RIA, clients was $2.6 trillion — of which $1.9 trillion was at Schwab and $700 billion at TD Ameritrade.

About 30% of RIAs in the new entity work with both Schwab and TD Ameritrade Institutional. The remaining 70% custody with one of the two firms. 

Some advisors in these two RIA segments also may work with other custodial firms like Fidelity or BNY Mellon Pershing. 

Fidelity Institutional, which includes non-RIA clients, reports that it had about $3.2 trillion in assets under administration as of June 30 and works with 3,000-plus RIAs.

BNY Mellon’s Pershing works with about 725 RIA firms with roughly $850 billion in advisory assets.

When the deal was first announced on Nov. 25, 2019, Schwab said the transaction potentially could unite over 14,000 RIAs.

Looking broadly at the situation for RIAs, though,  there are “two camps forming,” said Gavin Spitzner, president of Wealth Consulting Partners, after the deal’s announcement. “One, for those now with TD Ameritrade expressly not to be with Schwab, will use this as a reason to migrate away to an established firm or potentially an upstart like Altruist.”

The second camp could see the combination as having extra resources to invest in innovation and “doesn’t care about the competitive angle of their custodian competing alongside them in the wealth business and might grumble but will stay,” Spitzner explained. “Most interesting will be the ripple effects and who acquires or merges with who coming out of this.”

It’s worth recognizing that “there is no real truly branded fiduciary business — branded in terms of the consumer market,” according to Mark Tibergien, the former head of Pershing’s Advisor Solutions.

“There are some really great firms, but none that you’d say would be [every]where in the country … like Goldman Sachs or Merrill Lynch,” he explained.

That development, is ”probably going to take … the next decade or so” to occur,” said Tibergien, who now sits on the board member of RIA Pathstone.

For more details on the the deal’s history and insights into what it means for the future of the RIA industry, see the following pieces on ThinkAdvisor: