Schwab sends most RIAs to 1-800 custody service -- a downgrade the mass of incoming TD Ameritrade RIAs will have to swallow

We have custodied at td for 10 years and had a great experience. Have a small amount of assets at Schwab and and their technology and service is poor compared to TD . I like E-Trade but they will be bought out next year too. So looks like fidelity is the most logical choice since they are private company.?Maybe look at interactive brokers too for a second custodian?

Suffice to say the zero commission game has been won by Schwab. Yes, the same Schwab that has aggressively competed with RIAs for decades now. Oh, I do miss the wonderful Impact speeches reiterating their commitment to advisors, only to see their actions speak louder than the shallow words. But hey, all good things must come to an end and Schwab has spoken and good employees at TD will lose jobs and smaller RIAs will find another custodian to service their business. This while Schwab realizes a painful lesson in the next market downturn. Get ready folks as securititzed lending, directed order flow revenue and spread income will be hit hard and then the fine folks at the SEC will take a hard look under Schwab's hood and all will be ok...until it isn't. Grab some popcorn as the show is about to begin!

"Directed Order Flow" !! do your homework now i agree. This is one reason we are looking at Interactive Brokers (NOT their LTE free model.)

The tides are changing, and Schwab’s downshift in the bandwidth allocated to sub $200 mil advisory firms and solo wealth advisor shopkeepers focused on “quality of life” should not come as a surprise. Most everyone in our space running a well managed and professionalized advisory firm does some form of client segmentation, why should the expectation be any different for the custody service players? Unlike the independent brokerage space, where advisors with an inflated sense of self-importance often make it known “I feel like I can pick up the phone and talk to the CEO / President” as the critical factor to their landing spot among oodles of substandard skeleton crew IBDs…there aren’t really viable alternative choices for RIAs that need to put their clients best interests ahead of “making me feel special / important” It’s amusing to hear the spin from some of the other lower tier custody providers out there floating the premise of benefitting from this situation. Simple reality for RIAs is that paying more / higher costs to be serviced by platforms of lower quality technology and ease of use is going to be hard to justify. 3-5 years from now Interactive Brokers will still be catering to the same cohort of $10 million AUM solo money managers focused on running thematic global macro for their rich aunt and uncle. Schwab and Fidelity will be the duopoly in RIA custody, Pershing withers down slowly over time, E-Trade and Raymond James are bought on firesale at some point by wall street banks / multi-national financial behemoths.

Other things equal, have to think this will benefit and increase the appeal of the RIA aggregators and consolidators…If I am a $100 mil RIA, custodians will probably suck it up with velvet glove service if I am residing inside of larger pool of money and purchasing power

I've been dealing with Schwab for close to twenty years both on the Retail side as a former Branch Manager and on the Institutional side as an RIA. They are a great firm inside and out. A few complainers is never going to change that. The fact is that people in general do not like change. Most like the status quo. Well, I have news for you. There is no status quo in this business and if you think there is, you had better look in the mirror and ask yourself who the fool is that you are looking at. I applaud Schwab for being bold and aggressive and leading the charge. I'm a small fry RIA and the Adviser Core Team has been great to me. By the way, as a CCO, why in the hell are you doing wires? They are fraught with peril. Use Moneylink and tell you clients that is your policy.

When things seem too god to be true. They often are and a merger is a good excuse to address cost issues I expect the next move to be a custody charge. Mergers don’t always benefit current clients.

I use TradePMR for a couple of reasons. One important reason is that it is not competing for my client. With RIA's as the only client, I don't think we'll be marginalized (like Bettinger's comments about advisory income seems to do for Schwab RIAs). We all tell clients as RIA's we sit on the same side of the table as them. Why we should have our custodian on the other side competing for that business escapes me. SSG, TPMR, Equity Advisors, and other nimble custodians will probably be sending Christmas cards to Schwab for creating new opportunities to grow at its expense.

Schwabs goal is to maximize shareholder value. Its not compatible because there is no one does business with anyone anymore except for the true Sales Kingpins. Some RIAs got 20 billion in referrals from RIAs so its not channel compétition for all.

WHOA Reality, I think we need some clarity on what it is you're trying to tell us in your post.

Yes, that message made no sense. What I mean is that a few weeks ago RIAs were cheering Schwab for cutting commissions to zero first, and now we are where we are today. There is no such thing as "free" or moves to be less profitable with Financial Services firms like TD or Schwab. Its a difficult situation because the Schwab's of the world have a responsibility to its shareholders, and RIAs have a fiduciary responsibility to their clients. RIA Custody is a small part of Schwab's revenue unless you count the net interest revenue from money markets in RIA accounts AND SAN. The next big thing that is going to be pushed by some large players and Fidelity nonstop to RIAs is that holding any money in the affiliated Schwab money market isn't Fiduciary. I understand that point from a Fiduciary standpoint, but the reality is this will mean more RIAs tossed to the call center or worse. It will ultimately mean worse service for clients of most RIAs and I'm not sure how to balance that dichotomy. I do think somehow someway being a "Fiduciary" should be about embracing the reality that big firms like Schwab are about maximizing profits. Perhaps the solution that will be presented is for all RIAs to pay an AUM based custody fee. RIAs are not going to like that, but I think part of that is Investment Advisors competing on price as if "cheap" is a value proposition to clients. I do think what would help at least a little bit is for TD -Schwab to expand SAN and include more RIAs but limit RIAs to fewer offices. Yes, there is a solicitation fee, but for RIAs that wanted to participate this would promote collaboration and give RIAs with a unique offering and a very very appealing growth channel for those that know how to sell and want to partner with the custodian for referrals. It would also be a continued revenue stream for Schwab and mitigate "channel conflict."

Interesting topic with an even more interesting outcome. We'll wonder what will become of the RIAs looking to re-paper. As a new custody and clearing firm, we're very optimistic for the futures of the typical RIAs, and we're open to new changes as well.

In addition to the loss of jobs due to this buyout, closure of a now redundant # of branches, consolidation, which platforms survive and which don’t, amongst all the other issues, I didn’t see anything mentioned about the 3rd rate cut this year and it’s effects on even more squeezed net interest income. Remember Schwab canned 600 folks b/c partly of the 2nd cut this year...and then the Fed lowered again. Would layoffs now increase even more b/c of a 3rd cut in addition to those caused by this merger alone?

C, Good point. In summarizing big events leading up to this announcement, we left out layoffs that were ostensibly, experts said, tied to rate cuts. But now knowing that Schwab likely knew it'd do this deal, those cuts must be observed in that light. Meanwhile...cuts in rates.

Word is that TD Retail Financial Consultants got a letter today telling them that 10k jobs were going to get cut and info on their severance and stock vesting.

Reality, Can you email me about the latest post on the 10,000? It looks like big news. brooke@riabiz.com BTW, I have no idea why your post isn't showing up here. It came to my mailbox.

Brooke I believe you are correct on how the 600 job cuts should be viewed in light of this merger announcement. You can look at the following and wonder how far back the merger discussions go and when it was agreed to. Here are the major changes by both firms since 7/1: 7/12: Schwab announces they are no longer doing sales incentive trips according to the WSJ 7/22: TD Ameritrade announces Tim Hockey is resigning 7/24: Schwab announces it is getting rid of it’s current and former heads of Retail Distribution as part of a massive organizational restructuring according to your article 9/10: Schwab lays off 600 people as well as their head of Private Client 10/1: Schwab cuts commissions to $0, TD follows that day which is pretty quick compared to E-Trade who took a couple days and Fidelity that took much longer. 11/21: word of the merger leaks out. Why is everyone assuming the trade commissions dropping to $0 forced the merger? Is it not possible could have been agreed to before these changes and the trade commissions could have been the pre-text for a deal that came to fruition much sooner and for different reasons.

That is a mighty and tidy timeline!

Well, I don’t know what to do. I am a TDA, RIA, who has begun the process of retiring. I have gradually reduced my clients down to about 20 with only about $4 million under management. The clients that are left are the ones who started with me over 25 years ago. I am torn as to whether to just send them to Fidelity or ride out this storm. My future will not be to increase assets but quite the opposite. Any suggestions?

Janet, I'm not 100% sure the timeline, but I think you have at least a year and a half to plan things out in you and your clients situation. I may be wrong, but my understanding is this is going to be a process.

Paul Miguel thank you for your quick response and yes this is my understanding as well, that I have time. My goal right now is to let these few clients know what’s going on and offer them options. These people are just plain ordinary folks with the largest portfolio being a little over $500,000.00. They are the people who I started with many years ago. These people are for the most part over 70 years old. I took care of them like family. I want a smooth transition for them and therefore don’t want them snared in the Schwab transition. Since I already started the process of my retirement, I will most likely try to speed it up before any changes begin at TDA. Thank you again.