For those of you who would prefer to listen:
This week officially marked the end of an era. A new one was born. TD Ameritrade is no more. The Charles Schwab Corporation officially integrated the business it bought into a merged platform which created the largest discount broker dealer and custodian in our industry. It’s been a 3-year process. The acquisition was announced in 2019. Both companies operated separately throughout. I’ve watched it closely. Seeing them come together triggers mixed emotions. My relationship with both Schwab and TD is long and deep.
What just happened: 7,000 independent firms managing 3.6 Million clients with over $1.3 Trillion in assets transitioned from TD to Schwab over the Labor Day weekend. Another 3.6 Million retail clients came too. An integration of that size had never happened before. The “New” Schwab is the largest discount broker in the industry as well as the largest platform for the RIA (Registered Investment Advisor) space. Of course, that’s where we operate.
Financial Services has always been an innovative and disruptive industry. The stories of America’s investment arm are evolutionary, deeply rooted under that Buttonwood tree by that wall at the southern tip of Manhattan. The New York Stock Exchange was born. That was 1792.
Nearly 2 centuries later, a guy named Chuck started a traditional brokerage firm in San Francisco. The year was 1971. Chuck quickly became a pioneer in the discount brokerage industry. Back then, trade commissions were at a set price, regardless of the share count. They could be quite excessive, to the tune of $300+ for a small transaction. In 1975, the United States Securities and Exchange Commission abolished fixed-commission trading, allowing for negotiated commission rates. The Free Market took over. Chuck saw the opportunity and established a discount brokerage firm called Charles Schwab. The first branch opened that year in Sacramento, and the model quickly spread from coast-to-coast. The Charles Schwab Corporation was bought by Bank of America in 1983, but it didn’t last. Chuck and a group of investors bought it back a few years later to expand the vision. Schwab is credited for democratizing the investment industry for the masses.
Chuck wasn’t alone. An investor named Joe Ricketts founded a brokerage firm called First Omaha Securities in Nebraska. It rebranded as Ameritrade in 1983 and went public in 1997. Ameritrade acquired TD Waterhouse in 2006 and renamed itself TD Ameritrade. Toronto Dominion Bank acquired Waterhouse Securities in 1996, thus creating TD Waterhouse. The company entered the coveted California marketplace with its acquisition of another fellow discount broker pioneer’s firm, Jack White, out of San Diego in 1998. The roots of TD Ameritrade run wide and deep too.
News breaking that Schwab was acquiring TD on that cold November day in 2019 sent shockwaves throughout the industry. I felt the movement in our firm, under my feet. I live just 7 miles from the Hayward Fault. I am used to shakeups, in every variety. I knew immediately that everything was changing. I suppose it was inevitable.
Now, I joined my firm in 2002. Keep in mind, that was the worst of the 3-year Bear Market, after the Dot-com bubble burst. Sentiment was so sour. Both clients and employees were leaving. Fear was high and trust was low. I sensed an opportunity.
I pitched our Founder on a growth plan, modeling a culture of “financial first responders and physicians;” A team that runs in when most runaway. -It took-. That mindset served us and our clients well during the Financial Crisis, Brexit, Fiscal Cliffs, the Christmas Massacre in 2018 and of course Covid. We don’t always have the answers. But you can count on us to answer the call and help our clients face their challenges. We are their partners in the Business of Life.
We’ve been a partner with Schwab for 3 decades. But competition was heating up as the 21st century began. In some ways, Schwab was becoming a competitor within our industry. In 2006, we established a relationship with TD as they were a young and hungry organization focused on firms like us and clients like ours. We felt that having 2 custodian brokers as partners would be strategic for our firm’s vision.
Our experience with TD was a healthy one. It was authentic. But, it didn’t start out great. You see, we partnered with what was then TD Waterhouse. Just weeks after we made the move, the Ameritrade transaction was announced. That was another shock to the system, which brought unanticipated bumps. But facing challenges together is how relationships are cultivated and bonds are formed. I spent many years on TD’s Advisor Panel. I was 1 of 30 representatives from firms across the country that met quarterly with TD’s executives to discuss the industry, our businesses and how we can collectively get better. That was very useful.
Over the years, we built relationships with TD brass who, more importantly, are quality people like Tom Bradley, Tom Nally, Skip Schweiss, Pete Dorsey, George Tamer, Darla Sipolt and James Watts. I was extremely fortunate to meet some of our nation’s greatest leaders, like Colin Powell, Leon Panetta, Condoleezza Rice and Ben Bernanke, at TD events. I have fond memories hanging with Huey Lewis and the News, shaking hands with Magic Johnson and taking a punch from Sugar Ray Leonard. True story. I enjoyed sprinting 5Ks with fellow colleagues for charities. It was a community. We navigated through many a challenge over the years. It was a relationship grounded in shared experiences and trust.
The New Schwab is being led by the very skilled and seasoned Walt Bettinger. He’s been running the company since 2008. Leading the Advisor side, which is where we reside, is Bernie Clark and Jon Beatty. These gentlemen know the industry and are well-equipped to navigate this new platform. I take pride in having built some new relationships at Schwab while rekindling some old ones over the years. Integrity is everything to me and people like Brad Losson, Scot Kobashigawa, Nikolee Turner, Jerry Cobb, Shelly Gillis and AJ Hishida fit that bill. I also take comfort in knowing that many of the TD folks have made the jump to Schwab to make sure the culture blends green and blue. People like John Tovar, Mike Riley, Jay Wampler and Emily Bullis are trusted sources, and more importantly, friends.
The Schwab-TD merger sent a clear message. Bigger is considered better again in our industry. Deep pockets and expanded resources are always advantageous. But personalized service is paramount and hard to achieve at larger scale. It’s still a relationship business. Relationships are essential. Knowing your audience and anticipating their needs and desires is what it takes. That’s not going to change. Technology is merely a tool. But those that don’t try to get in front of the trends by embracing the technological advancements and personalizing relationships, run the risk of becoming a tool themselves. That’s a big risk for we humans in the Age of AI.
So, a new era has begun. The need for quality financial service remains high. It’s definitely a Bull Market for advice. How that advice is delivered and received continues to evolve. That won’t change. That’s always been the way. It wasn’t that long ago that email was new.
The Digital Age has brought many innovative solutions. Information is so pervasive. Determining what’s credible, responsible and suitable for you will still be a challenge. It’s a worthy challenge that the best of the best will always embrace. Artificial Intelligence will no doubt play an increasing role. The trend is strong and irreversible. But natural, human intelligence is and will forever be a critical component. Experience and expertise matters. Confronting and solving problems together will always be the Bedell Frazier way.
I don’t know how much longer I’ll be doing this. But I take pride in being at the epicenter of this great renaissance in financial services, where the fiduciary standard and the client-first model has risen to the top, and the rest of the industry is chasing what we’ve done from day 1. Both TD and Schwab have helped make that happen. That will continue; As one. It’s all evolutionary and a new chapter begins.
It’s an end of an era for another aspect of this American life. We lost Jimmy Buffett over Labor Day weekend. Few on Earth were able to put smiles on faces and take people towards relaxation than James William Buffett. His music and attitude were timeless. He reached generations. Jimmy Buffet will be missed. But we can always keep him and his music with us. So, if you find yourself a little anxious and stressed searching for that lost shaker of salt this weekend because it’s 5 o’clock somewhere, just know that come Monday, it’ll be alright.
With the New Schwab and Bedell Frazier, it’ll definitely be alright.
Have a nice weekend. We’ll be back, dark and early come Monday.