updated 2:28 PM CEST, May 24, 2023

Schwab/TD Ameritrade merger gets go-ahead from U.S. Justice Dept, shareholders

Charles Schwab's London offices Charles Schwab's London offices

The proposed acquisition of TD Ameritrade by San Francisco-based, NYSE-listed Charles Schwab appears likely to go ahead befor the end of this year, following news this past week that U.S. Justice Department officials had decided not to block it on antitrust grounds, and Schwab and TD Ameritrade shareholders voted overwhelmingly in favor of the deal.

Both companies' shares surged on the news, while wealth managers with American expat clients said it was still too early to say how, if at all, the deal will affect them. 

"I think that we are still largely in the dark about the effects of such consolidation, and I imagine the points of conflict between Schwab and TD, regarding foreign jurisdictions, will likely be one of the last issues resolved," said Keith Poniewaz, director of international advisory services for Wisconsin-based Walkner Condon Financial Advisors.

"There has been little guidance from either firm as far as we've seen regarding expats, and I imagine that, unfortunately, expats and their advisors will likely be in the dark for a while still."

Today Schwab is said to hold more than 12.9 million active brokerage accounts, and US$3.8trn in client assets, on behalf of its U.S. and international customers.

When it completes its takeover of TD Ameritrade, the as-yet-un-named new company, often referred to informally by commentators as "Schwabitrade", will become a brokerage giant, with an estimated US$5trn in combined assets, while at the same time further consolidating America's brokerage industry. 

One published estimate, by Keefe, Bruyette & Woods analyst Kyle Voigt, puts Schwab's share of the U.S. Registered Investment Adviser (RIA) asset custody market at around half, with TD Ameritrade holding 15% to 20%. (RIAs are SEC-registered investment advice firms in the U.S.) 

As reported, Schwab announced its plans to buy its smaller, Omaha, Nebraska-based U.S. rival, for US$26bn in an all-stock deal "valued at approximately US$26bn" in late November of last year, following reports that had begun to appear in the press that such a plan was in the works. 

It then quoted Schwab president and chief executive Walt Bettinger as saying the company had "long respected TD Ameritrade since our early days pioneering the discount brokerage industry, and as a fellow advocate for investors and independent investment advisers". 

On Thursday, Bettinger said he and other officials at Schwab were "pleased that Schwab’s stockholders have approved the proposals related to our announced acquisition of TD Ameritrade", and added: "The combination will generate substantial long-term value for Schwab’s stockholders, and bring together two leading firms with proud and similar histories of making investing more accessible to all.

"Together, with a focus on low cost, great service and technology, we will form a company that is uniquely positioned to serve the investment, trading and wealth management needs of investors – and the advisers who serve them – in every phase of their financial journey.”

Among those watching the progress of the Schwab/TD Ameritrade deal most closely are government and property industry officials in San Francisco, where Schwab is currently headquartered, and Westlake, Texas – in the Dallas-Fort Worth area – where the company has recently built a new corporate campus that it has said will eventually become the base for the newly-combined company. 

Size of 'Schwabitrade' 
American expat base unknown

Neither Schwab nor TD Ameritrade is known to have revealed the size of its expatriate client base. Both companies' expat-servicing businesses are thought to have benefited from a shift that began to take place in the wake of the signing into law, in 2010, of the U.S. Foreign Account Tax Compliance Act, which saw many other financial institutions, particularly non-U.S. banks, stop having Americans as clients, due to the added costs of compliance, and the significant potential risks involved if found to be non-compliant. 

As reported,  Schwab began notifying clients in Europe last year that they needed to take certain actions with respect to their accounts, including in some cases transferring their assets to another financial services firm "as soon as possible" or else close or sell their positions, as a result of a change  in the company's business model "mostly due to the UK’s decision to leave the EU”.

Other U.S. brokerages currently active in the expat American space include Interactive Brokers and Pershing. 

The Schwab/TD Ameritrade deal is taking place at a time when the brokerage industry is embroiled in a price war, with trading fees being slashed to zero, making the prospect of being able to reduce overheads as a result of merging that much more attractive.