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What’s Ahead For Charles Schwab After Merger, Pandemic

Charles Paikert, New York, October 28, 2020


Charles Schwab is going through the process of digesting its TD Ameritrade acquisition, and senior executives have spoken about some of the tough decisions they are having to take as well as their predictions for the North American wealth management space. We report from Schwab's annual Impact conference.

Top Charles Schwab executives mixed tough love with confidence and optimism about the future of independent advisory firms as the industry’s largest custodian kicked off its 30th annual Impact conference yesterday.

Just a day after cutting 1,000 jobs in the first throes of digesting the newly-acquired TD Ameritrade custody business, Schwab chief executive Walt Bettinger told over 2,000 advisors watching the virtual conference that more job losses were “still to come.” (See here for the report of that deal's completion.)

Bettinger saluted the departed TD employees in his keynote address, saying it was “not easy to part ways” with them, but noted the “great deal of change” the year has brought so far. “Frankly,” he warned, “there are some tough days ahead.”

Notable TD executives who won’t be joining Schwab include Tom Nally, Steve Boyle, Peter deSilva, Prashant Bhatia, Peter Dorsey, Jim Dario and Kate Healy.

In a call with reporters on Friday, Bernie Clark, Schwab’s head of advisor services, referred to the events shaping 2020, including the COVID pandemic, recession, high unemployment and a contentious presidential election as a “period of uncertainty.”

“Surprisingly resilient”
On Tuesday, however, Bettinger and Clark expressed confidence that the future was bright for advisors - and the bulked-up Schwab.

Citing Schwab’s just-released Independent Advisor Outlook Study, Clark said that the RIA business was “thriving” and producing growth rates of 8 per cent to 10 per cent. Bettinger noted that Schwab had “adapted quickly” to the pandemic, opening virtual offices with 95 per cent of its workforce working from home.

Wealth managers also proved to be “surprisingly resilient” in the wake of the coronavirus’ impact on the economy, Doug Regan, co-chair of Chicago-based Cresset Capital, said in an interview. 

Advisors benefitted because the pandemic resulted in a “stronger reliance on people you trust,” Regan said, adding that the phenomenon has resulted in organic growth of net new clients for his firm.

What TD advisors can expect
At the conference, Bettinger and Clark assured advisors who custodied with TD Ameritrade that there would be no minimum for assets under management or custody fees. 

And while the Schwab Advisor Center will be the foundation of the custodial platform, popular TD programs including Veo and ThinkorSwim will be included.

“We will grow the capabilities from both Veo and Veo One on top of that platform,” Clark told advisors. “We recognize Veo has some fantastic capabilities and over time we’ll continue to incorporate those.”

The all-stock acquisition of TD Ameritrade, valued at $22 billion, closed earlier this month. “It’s early days,” Clark noted, adding that the complete integration of the two companies and its approximately 30,000 employees could take as long as three years.

Even so, Schwab’s dominance is already evident. The RIA custodian and digital and discount brokerage firm has $6 trillion in client assets, works with 10,000 advisory firms and controls 51 per cent of the RIA custodial market.

The merger, according to the firm’s founder and chairman, Charles Schwab, “isn’t about being the biggest. It’s about being the strongest.”

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