Happy Thanksgiving

If the past couple of years have taught us anything, it’s that we have a lot to be thankful for. Personally, I’m thankful to live with my family in such a beautiful place while doing work that I love. This week, from my family to yours, I wish you a wonderful Thanksgiving. I hope that you get to spend it with family and others whom you love dearly.

Early one morning last week I was reading an article about continuing care retirement communities for a future blog post. Then I checked my email and… boom, rumors that Schwab was buying TD Ameritrade for $26 billion! This was a shock even though the brokerage industry has been going through changes lately and “consolidation” was likely. Frankly, I had assumed a smaller firm like E-Trade would be taken over, perhaps even by TD itself.

Yesterday morning those rumors were confirmed. There will be regulators to contend with and a host of other issues I’m sure, but most seem to think the deal with close sometime during the latter half of next year.

What does this announcement mean for you? (By “you” I’m referring to those wonderful clients whom I work with on an ongoing basis and use TD as custodian.)

The bottom line, I think, is that the sale (takeover, merger, or whatever else you’d like to call it) of TD to Schwab will have little direct impact on you and your investments. Why? Fundamentally, both firms are custodians, or holders and protectors of your investments, and operate largely in the background. That’s the core role both play in the market today and they do it well.

TD, for example, holds your investments, processes transactions, generates statements, and sends data to other systems I use when working for you. Schwab does the same thing for its institutional clients and I don’t see any of those fundamentals changing through this deal. Size and strength are important in the custody realm and the combined company will hold something like $5 trillion in client assets and 24 million accounts. That’s huge for a financial institution that isn’t a bank.

Both firms are very similar in terms of the nuts and bolts of their service offerings, so it’s hard to complain about this deal from an investor choice perspective. Importantly, both went to $0 trade commissions on most investments back in October, so there isn’t much of a cost difference either. The other differences between the firms are deep in the weeds.

What will likely happen at some point well into 2020 is that your accounts will be “moved” to the Schwab system as the firm absorbs accounts held at TD. Schwab and TD say that total integration could take from 18 months to three years, so it’s no small undertaking, that’s for sure. This could lead to minor headaches, but nothing bad would happen to your investments, or anything like that.

I’ll be keeping you informed along the way, but please feel free to ask questions as they come up.

Have questions? Ask me. I can help.