Big news out of the brokerage world as Charles Schwab is reportedly in talks to buy TD Ameritrade, a source told CNBC on Thursday, and it’s being called the “deal of a lifetime.”
“A deal between Schwab and TD Ameritrade would create a behemoth with more than $5 trillion in combined assets, about $3.8 trillion from Schwab and $1.3 trillion from TD Ameritrade,” the network noted, adding that shares of TD Ameritrade soared 16.9% on the news, its best day since September 2008. Schwab’s shares surged 7.3%, its best day since November 2011.
Charles Schwab will pay $25 billion for TD Ameritrade, the Financial Times reported.
The CNBC source added that Charles Schwab CEO Walter Bettinger has been designated to run the combined company. TD Ameritrade CEO and President Tim Hockey said in July he is leaving the brokerage in February of 2020.
Eliminated online commissions
The news comes after last month’s announcement that Schwab would eliminate commissions for online stock trades, rattling competitors in a race to the bottom that many saw as a precursor to consolidation.
While brokerage accounts are still somewhat rare in 401k and related defined contribution plans, the move was part of an industry-wide effort to reduce what was traditionally seen as the excessive cost to invest, which can significantly lower returns for clients over the long-term.
TD Ameritrade followed suit days later, also eliminating commissions on trades, as did Fidelity Investments on its 21.8 million online accounts a week later.
“Charles Schwab, the founder and chairman of the eponymous group, said last month that consolidation in the brokering sector was a ‘logical conclusion’ for an industry that had been struggling to compete against challengers,” according to the Financial Times, which added, “Analysts have said in recent months that the shift towards zero trading commissions would ultimately force brokers to consolidate.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
