RIAs are expressing mixed feelings about Charles Schwab’s $26 billiion planned acquisition of rival custodian TD Ameritrade.

Competitors, ranging from giants like Fidelity to smaller speciality fintech companies, are eager to capitalize on what they hope will turn into a wave of dissatisfaction. But that has yet to materialize.

While some advisors are optimistic that the deal could mean better services for RIAs across the board, others fear that the transaction will leave smaller firms behind and stifle innovation.

“From a consumer perspective, I don’t see a good outcome coming from this deal,” said an advisor at a large New York RIA who asked not to be identified. “There are two large players consolidating, the public won’t be well served, there will be fewer choices and less competition.”

The deal, announced two weeks ago, would merge the nation's two largest publicly traded discount brokers into a gargantuan entity with more than $5 trillion in client assets. The companies said they expected to close in the latter half of 2020, but that's pending a regulatory review.

Jim Besaw, chief investment  officer at GenTrust, an RIA with offices in New York and Miami, saw the transaction as a logical next step for the financial industry.

“It’s the logical evolution of the business,” said Besaw. “It’s part of costs going lower across the board and having retail investors access investing at the lowest possible costs.”

Over the years, TD Ameritrade has made efforts to work with smaller advisors and help them to build and, if desired, grow their practices, but the company has placed less emphasis on rapid growth and advisor transactions than Schwab. With the acquisition, smaller firms comfortable in their relationship with TD Ameritrade may balk under pressure to either grow or to sell to a larger competitor in the marketplace.

Unlike TD Ameritrade, Schwab has established AUM minimums for its advisor clients and growth expectations for newer firms, which could leave some TD-custodied advisors looking for a new partner.

In recent blog posts, Pinnacle Advisors’ Michael Kitces noted “trepidation” from large and small RIAs alike. While small RIAs fretted over service levels and asset minimums, larger RIAs have been able to play custodians off of one another for better services and deals, and have been able to enjoy the independence of being multicustodial, he said. With a huge combined firm potentially dominating the industry, being multicustodian may no longer make sense.

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