In the October Par 3, we wrote about Charles Schwab and TD Ameritrade reducing commissions to $0. One month later, Charles Schwab and TD Ameritrade announced plans to join forces and merge into an industry giant with over $5 trillion in client assets. The market appeared to like the $26 billion deal as the price of each stock rose significantly after the announcement. We like the outlook for the combined entity as well.
As you know, Schwab and TD Ameritrade are custodians for registered investment advisors (RIAs) like The Watchman Group. Prior to the merger, Schwab was the largest service provider to the RIA market with Fidelity and TD Ameritrade behind them. The new Schwab / TD Ameritrade entity will further distinguish the firm as the dominant service provider in the space.
Here are some key points to note:
- The merger is not yet complete and must go through regulatory approval.
- The deal is scheduled to close in the second half of 2020.
- Schwab and TDA will operate separately until the merger closes.
- Integration is expected to take 18 to 36 months.
- Schwab and TDA account holders will not see any changes related to the merger until after the close and future changes may not unfold for another 1 ½ to 3 years.