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Huge Deal in the Works in World of Online Brokers

Charles Schwab will buy smaller rival TD Ameritrade
By John Johnson,  Newser Staff
Posted Nov 25, 2019 6:53 AM CST
Updated Nov 25, 2019 7:03 AM CST
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A Charles Schwab office in Oakland, Calif.   (AP Photo/Paul Sakuma, File)
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(Newser) – The word "behemoth" is being thrown around a lot Monday to describe a merger in the world of online brokers: Charles Schwab plans to buy TD Ameritrade in a stock deal worth $26 billion, reports Reuters. Just how big would this be? Schwab is already the dominant player in the industry with $3.8 trillion in client assets, and TD Ameritrade would add another $1.3 trillion to that pot, reports CNBC. The combined company would serve 24 million clients, assuming the deal goes through as expected late next year. The New York Times puts the deal in context, explaining that the "brokerage industry has for years been coping with a price war in the fight for retail investors’ dollars, who are increasingly leaning away from picking and owning individual stocks and more toward low-cost index funds and services that incorporate investment advice."

In fact, Schwab recently dropped its fees on trades of online stocks and exchange-traded funds, forcing other companies to follow suit, per the AP. “The move to zero commissions in the industry has put several firms in a really tough spot,” says an analyst at the industry research firm Aite Group. The stocks of both companies were surging Monday on the news, though the proposed merger is sure to get a close look from antitrust regulators. The Wall Street Journal notes that one important group isn't happy: Registered financial advisers, or RIAs, who use the online brokerages to manage their clients' money. “All of us out there are questioning whether you can maintain service quality at that size,” says Brice Carter, chief investment officer at Financial Strategies Group in Michigan. (Read more Charles Schwab Corp stories.)

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