When Charles Schwab acquired TD Ameritrade in 2019, executives from both firms promised registered investment advisors that the eventual integration of TD Ameritrade’s custody business with Schwab Advisor Services would be a smooth and simple one for firms and clients alike.

More than three years later, after pandemics and market turmoil, that integration is expected to be complete by the end of the third quarter, according to Lisa Asher, a manager at F2 Strategy, a consultancy for the wealth management industry, and for the most part, the promises of Schwab and TD Ameritrade executives will hold true.

“At the time they were announcing the transaction, the big concern from advisors I was working directly with was around repapering,” said Asher. “In most cases, there won’t be repapering. I wouldn’t say that advisors need to be concerned about this transition, but there is some planning that needs to take place.”

That’s why F2 Strategy has launched a five-part online report to help advisors prepare for the integration as part of its Insight Series of educational resources.

The Schwab-TD Ameritrade transition is unusual for advisors, said Asher, because it’s being imposed upon their practices internally after an acquisition.

“They weren’t planning for it, and now they have to include it in their overall plans,” said Asher. “If they want to do something else, they have to focus resources on planning for it. When a business is making a change internally, it at least feels more controlled by the advisor and the firm’s leadership. There’s a little more apprehension when change comes from an external source.”

Think Strategically
Part one of F2’s reports is focused on high-level strategic thinking that firms may want to do for the integration. Asher said that firms should think about their goals and consider how the integration affects their ability to achieve them.

From a technological perspective, firms need to think about how they might need—or want—to change their technology for the integration.

Part two of F2’s reports looked at how rolling TD Ameritrade into Schwab might raise some operational questions for RIAs.

“There won’t be a significant change for TD clients or prospects,” said F2 Strategy founder and CEO Doug Fritz via email. “One question/issue will be ‘when and which’ onboarding docs should a new client sign during the migration. Schwab has done a good job helping firms get ready for that, but we would expect it to be one of the business development areas that will still have questions. 

“One area we have not yet explored is the impact to Schwab’s referral business. This is a significant source of new business for their larger clients and it’s not clear to me if there will be an impact there. Our expectation is that there won’t be an impact.”

In this section, Fritz and Asher offer a checklist of things that advisors should do as the transition approaches. For the late first quarter and early second quarter of the year, advisors should consider designating a firm security administrator, mapping operational processes and reviewing and deleting inactive users and rep codes (user and client ID tags) from TD’s Veo One system.

Later, firms need to start training on Schwab Advisor Center, updating client account information and ensuring that their third-party managers are available on Schwab’s platform.

As the transition nears, advisors will want to focus on reviewing clients’ direct deposit and their automated clearing house instructions, making a list of open orders to transfer, and archiving any Veo One data files.

“From our independent vantage point, firms that have problems with this are probably not doing the prep work or organizing their pre-conversion activities well enough,” said Fritz. “Undoubtedly, Schwab will continue to receive negative press about it, but we’re expecting those with the most issues to be the ones that prepared and planned the least.”

F2 Strategy considered how to handle clients in the third part of its report on the joining of TD’s and Schwab’s systems.

“We know this is something important, but this is industry news that is mainly big within the financial industry,” said Asher. “It’s not national news, like the [Silicon Valley Bank] collapse. It might not be something that has reached clients yet. It’s something that clients will learn about when they log into an advisor’s client portal and start seeing messages, or earlier if the advisor proactively starts to reach out. That’s where we provide a time line of when notifications will occur, so the advisor can get in front of the clients who may hear the news and become concerned.”

Asher and her colleagues advocate the use of client personas to segment clients by behavior and communication preferences, so advisors can know and keep track of those who need to be reached out to more proactively or in a more high-touch manner.

The fourth section of the report, slated to be released on Thursday, will examine vendor considerations firms may have for the TD-Schwab integration.

“In addition to TD Ameritrade and Schwab, advisors will have a number of third-party vendors that they will need to coordinate with,” said Asher. “I don’t think advisors should assume that all their vendors will be proactive in sharing their plans of action, so it’s on the advisor to reach out and make sure all the connections and integrations are in place.”

Advisors should also weigh the costs and benefits of changing technologies before and after the transition.

F2 will publish one more section of its report to help advisors prepare for the integration on Thursday, March 30.

The fatal mistake RIAs can make in an external transition is assuming that everyone has the same information and that everyone is naturally working in a coordinated manner, said Asher. Advisors need to be proactive about discussing the transition with their clients, with their vendors and internally.

“There was this lull in activity regarding people talking about the TDA-Schwab transition, then we got an announcement that this would all be completed by Labor Day weekend, and that got the conversation started again,” said Asher. “The good news is that Schwab has done a good job providing tools and resources to advisors, they’ve been transparent about the time line, and the firms who need to act have time to do so.”

While Asher said that likely very few firms—maybe not even one in 100—will need to repaper as TD and Schwab complete their combination, every firm should view the transition as an opportunity to make changes.

“This is an opportunity for what we like to call a spring cleaning,” said Asher. “Firms are spending so much time working in their day-to-day business that they aren’t taking opportunities to work on their business, but when you have an event like this it does force you to step back and look at how you do things, and how you might be able to digitize them.”