Tradecraft aside, Schwab and TD Ameritrade are both responding to the tectonic shifts in their business. Price competition extends beyond commissions to investment products, too: Fidelity Investments is now charging nothing at all for a handful of its funds.
Pressure has been intensifying: In the 1970s, Schwab charged about $70 for a stock trade. By the 1990s, the price had dropped to as little as $30, and in the mid-2000s it cost about $13. After Schwab’s move in October, it was free.
The race to zero, after so many years of resistance, partly reflects a generational shift. While many baby boomers are accustomed to paying fees, younger people have come to expect free trading from a new crop of competitors such as Robinhood Financial.
Schwab’s TD Ameritrade deal, expected to close in the second half of 2020, would create a formidable giant with $5 trillion in assets. The company would be so large that some analysts have said the deal might draw antitrust scrutiny.
Bettinger, the CEO, flicked away those concerns on a call with analysts Monday.
“We have numerous competitors, many of which are far larger than us today and far larger than a combined organization,” he said, naming Fidelity and Vanguard Group among the bigger challengers. “They’re going to continue to come right after us, as they are now in all aspects of the business.”
Toronto-Dominion Bank, which owns 43% of TD Ameritrade, initially reached out to Schwab, people familiar with the matter said.
Schwab’s eliminating of fees prompted TD Ameritrade and other rivals to follow suit. In the wake of the move, TD Bank again reached out to Schwab to restart the discussions, according to one of the people familiar with the matter.
Representatives for TD Bank declined to comment.
The marriage of Schwab and its smaller Midwest rival left independent advisers and competitor firms scrambling to decode how the combined company will transform the brokerage business, which has already undergone considerable upheaval in recent years.