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Schwab & TD Ameritrade Merger – What It Means For You & Your Money

TD Ameritrade and Charles Schwab Corp. announced plans to merge forming the largest custodian of investor assets. This tie-up of goliath custodians may impact you and your nest-eggs considering that the combined company will hold over 24 million accounts and $5 trillion of client assets.

                                   A Schwab-TD Ameritrade Combo Will Hold About 11% Of Client Assets  ($ in Trillions)

Source: Charles Schwab

This Will Take Some Time 

For the foreseeable future, I believe it should be business as usual for both parties.  From a timing perspective, the deal is expected to close in about 12 months, with full integration of the two companies taking about 2 years. I would expect some deal pushback from regulators given the size and market shares so this will be something to monitor.   

There is also some concern that this deal will reduce competition and in turn slowdown technological innovation. That could be the case longer-term, however, both TD Ameritrade and Schwab have been leaders in innovating client and advisor friendly services and products over the decades. Therefore, this should remain in the combined company’s core DNA.

Mergers Happen. Expect More 

I have advised through similar custodian mergers like the proposed TD Ameritrade/Schwab marriage. In 2017, TD Ameritrade purchased Scottrade. As an advisor during this integration, I experienced minimal disruption with client assets and service.   Additionally, given the recent industry move to no cost trading and yesterday’s merger announcement, I would expect more mergers may occur with other independent custodians. So even if your money is not held at Schwab or TD Ameritrade, you could find your custodian entwined in merger mania.

Schwabitrade – Patience Needed

Clients of both companies should not experience any major deal related changes to accounts until the deal is closed. Typically, the acquiring firm, Schwab in this case, begins to make changes post deal in slow drips over a couple of years in order to minimize service disruption to clients. If you are a Schwab or TD Ameritrade client, starting in about a year, I would expect a steady news flow of merger-related updates involving possible charges for custody services, trading technologies, branch network, branding etc.