Meanwhile, TD Ameritrade, along with a few of the other custodians, had previously touted the fact that it was not competing against RIAs. It will now be part of an organization that does. Will RIAs’ best friends, their custodians, one day put them out of business? Probably not, but the Schwab/TDA merger will need to be monitored from this perspective.
3. The transition might create burdens for clients.
We don’t yet know what the merger will mean for RIA clients whose accounts are held at TDA. Ideally, the merger will not be a meaningful burden on them as they migrate to Schwab, but it’s probable that there will be at least some. Thus far, Schwab has not taken a definitive position on matters such as the client-consent or “repapering” process, but clients generally do not like change that has been forced on them, and it will be important to understand what any such change ultimately looks like.
Then there are the service and experience unknowns. Will TDA clients be “sold” products or services by Schwab? Will their cash end up at Schwab Bank? Will they experience less of a personal touch in favor of more technology? The answers to these questions will be important for RIAs and their clients.
4. The transition might create burdens for RIAs too.
Beyond the transition of their TDA clients to Schwab, RIAs will be faced with issues surrounding their use of the legacy TDA technology and other platforms, as well as the uncertainties that inevitably arise as service and relationship teams change from one platform to the other.
5. There could be an effect on smaller RIAs.
TDA has been public about its efforts to support smaller RIAs, including small teams who leave the wirehouses seeking independence. Some have argued that Schwab has been less enthusiastic about this segment, though the evidence does not necessarily support these assertions. Indeed, Schwab appears to be reinforcing its commitment to smaller RIAs with its recent hire of high-profile personnel to support them. Nevertheless, small RIAs that do make the transition could face disproportionate hurdles—if only because of their size—as they attempt to navigate the new landscape, including Schwab’s platforms, whatever they may look like after the merger.
The Verdict
The matter of Schwab and TDA is not yet ripe for a decision, despite the rush of commentators prematurely rushing to judgment. It must be remanded to the court of RIA and client public opinion based not on speculation but on the actual evidence produced and submitted by the parties as they move toward, and ultimately beyond, a closing of their merger. The stakes are high either way. If the merger is good for RIAs, it will be a powerful boost for an industry that has been hurt by other recent developments. If it is not, then the damages could be substantial, and the judgment of the industry will be swift.
Michael J. Nathanson, JD, LLM, is chairman and chief executive officer of The Colony Group.