Do advisors really believe that Charles Schwab is paying $26 billion to buy an 8-basis point custodian business from TD Ameritrade?

That 8 basis point figure is what custodians earn to provide services to RIAs. Between 80% and 90% of their revenues resides elsewhere.

Pershing Advisor Solutions CEO Mark Tibergien, like others, believes the mega-merger is all about the two firms’ retail brokerage and advice business. In his current position, Tibergien has a horse in the race. Pershing Advisor Solutions provides custodian services for 740 RIAs overseeing $760 billion and doesn't have a direct-to-investor business.

So he isn't an unbiased observer. But a quick scan of the Schwab-TD combination underscores the overarching importance of the individual investor.

Schwab generates about $11 billion in annual revenues, and approximately $1.2 billion of that comes from  RIAs. At TD, the figures are $5.8 billion in total and $600 million from advisors.

There is a reason custodians can make a lot of money off RIAs. The "custody business is, at best, a 10-basis-point business unless you require your RIAs to use your proprietary sweep solution, which can add 150 to 180 basis points on cash balances," one observer notes. "But then you become an agent of the custodian rather than an advisor making choices in their behalf."

Retail investing is “in the DNA” of both firms’ respective founders, Chuck Schwab and Joe Ricketts. Of equal significance is the fact that the combined firm will still be smaller than Vanguard, which just happens to be the single biggest employer of newly minted CFP licensees.

Schwab has been far more aggressive than TD in seeking to provide advice to retail investors and it could be the driving raison d'etre underlying the logic for the new mega-brokerage firm. “There are opportunities in the marketplace they’d like to pursue,” Tibergien says.

In the past, Schwab retail executives have confided that they tend to lose retail business to advisors when clients assets reach $1.5 million to $2 million. It’s clearly a source of frustration and it's only natural they’d like to push that number higher.

There are also signs neither Schwab nor TD has been particularly happy with the trajectory of their retail businesses. Earlier this year, Schwab terminated its head of retail. And Tim Hockey's resignation as the CEO of TD in July—officially attributed to differences with its board of directors—was said to have little to do with its RIA platform.

"In large organizations, there are a million reasons why people come and go," remarks Tibergien, warning not to read too much into a few personnel moves. But it's clear Schwab and others would like to crack the secret code that Vanguard has discovered when it comes to serving vast swaths of the investing public.

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