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Brokerage Rant - Schwab Acquisitions

beebee
edited October 14 in Other Investing
About 1 year ago I wrote this:
USAA recently "sold" their Investment division to Charles Schwab for $1.8 Billion. That's $1,800,000,000 in cash. USAA will transfer $90 Billion in assets to Schwab sometime in May 2020. I asked how individual investors (there are 1 million) will benefit from this sale. I am still waiting for that answer. This latest move may not mean anything for the orphan investors who are leaving USAA for Schwab. Doesn't look like individual account holders will receive any of this $1.8B as a "bonus" for this asset transfer.

The 1 million investors seem due some it not all of this windfall.
Instead of sitting still and letting my assets move uncompensated I instead actively move my assets twice. Once to Merrill Edge and then again to TD Ameritrade. I received bonus transfers totaling $2,500 which neither Schwab nor USAA where willing to offer me.

I am again facing a similar scenario at TD Ameritrade:
Charles Schwab SCHW has concluded the acquisition of TD Ameritrade Holding for roughly $22 billion. This led to creation of a behemoth in online brokerage space with combined client assets of more than $6 trillion and serving nearly 28 million brokerage accounts.
That's $6,000,000,000,000 AUM. The average account balance ($6T/28M accounts) is about $272K / account. TD paid me a bonus transfer of $1,500. This will not be offered to me if I sit and wait for the "acquisition transfer" to happen between TD and Schwab.

Any good "Bonus balance transfer" offer out there?

Comments

  • beebee
    edited October 13
    Ally Invest Review 2020:

    https://wallethacks.com/ally-invest-review/

    The 13 Best Brokerage Account Promotions and Bonuses for 2020:

    https://wallethacks.com/best-new-brokerage-account-promotions/

    Chase Private Client Offer ($2000):

    https://account.chase.com
  • I think you can move to Schwab ahead of the transfer and get bonus $....I think it was posted here last month or so....or maybe M*?

  • I'm 80% moved from TDA > Schwab. They gave me 2 years of free options trades when I moved 200K. I wasn't looking for any bonus, but it was a nice touch. I should followup to see what they'll do for me now that I've moved significantly more over to them in recent days.
    Graust said:

    I think you can move to Schwab ahead of the transfer and get bonus $....I think it was posted here last month or so....or maybe M*?

  • With Vanguard creating a brokerage would that be investor owned or is only the (original) Vanguard investor owned ? Only asking to see if those still holding (original) Vanguard investors due money if sold to say Schwab .

    stay safe , Derf
  • msf
    edited October 13
    Derf said:

    With Vanguard creating a brokerage would that be investor owned or is only the (original) Vanguard investor owned ? Only asking to see if those still holding (original) Vanguard investors due money if sold to say Schwab

    When a company is acquired, its owners, not its customers, benefit. For example, when Adidas acquired Reebok, it was the Reebok shareholders who benefited. If you were a customer walking around in Reeboks, you didn't suddenly get some free laces.

    TD Ameritrade (formerly Ameritrade) was a publicly traded company, 40% owned by Toronto Dominion Bank. So when Schwab acquired TD Ameritrade, likewise the owners of TDAmeritrade (stock holders and TD Bank) were the ones to benefit, not the customers of the business.

    If Vanguard Brokerage Services were to be acquired by Schwab, it would be the owners of VBS to benefit. It turns out that "Vanguard Brokerage Services [is] a division of Vanguard Marketing Corporation." Vanguard Marketing Corporation in turn is "a wholly-owned subsidiary of The Vanguard Group, Inc".

    It is common knowledge (a way of saying I'm too lazy to provide a citation) that The Vanguard Group is owned by Vanguard mutual funds which in turn are owned by the Vanguard fund shareholders.

    So, if VBS were sold to Schwab, its owners, in this case Vanguard mutual fund investors, would be the ones to benefit. Not the customers of VBS, except to the extent that they were also Vanguard fund investors.
  • beebee
    edited October 14
    @msf. In USAA's case, their customers are also their shareholders so in sense I should see some of these dollars making improvements at USAA.

    Aside from that point, if a company is going to treat one customer differently than another (offer different incentives) this leave the company open to criticizism at the very least and fewer satisfied customers at most.

    Though Scwab offers a transfer bonus to individuals who open a new account, it will not offer any incentives to these TD accounts acquired in the deal. Seems inconsistent to me from a customer service perspective.
  • Could you clarify? You suggest that Schwab is treating one class of customers (not potential customers) different from others. That sounds like you're saying that once TD Ameritrade clients became Schwab customers (via acquisition) they were no longer eligible for bonuses.

    Something like that seems perfectly reasonable. Rarely does a broker offer incentives to existing clients to retain them. In this sense, Schwab is treating its customers the same - regardless of how it acquired their business, once acquired, customers are not paid bonuses.

    Financial institutions will often offer bonuses to add "new money". That's something different. You're not bringing new money to Schwab from outside. For example, here's some fine print on Merrill Edge's offer: "Assets transferred from other accounts at Bank of America, MLPF&S, U.S. Trust, or 401(k) accounts administered by MLPF&S do not count towards qualifying net new assets."

    Where is the outrage here? Merrill is not giving bonuses for money already in the BofA empire. It doesn't matter that the cash is new to the brokerage business if it is coming from a BofA bank account as opposed to a Chase account. It doesn't matter if assets are coming from a US Trust account that BofA acquired in 2007, as opposed to assets coming from Schwab. (Which in itself is interesting, because BofA used to own Schwab.)

    Back in the 90s, the same customer acquisition games were being played by the long distance phone companies. Cash a check and switch your service. Should companies have sent "cash and switch" checks out to customers they'd already acquired via mergers? Or would that be "treat[ing] one customer differently than another"?
  • @msf; Thanks for answering my question.
    Stay Safe, Derf
  • Former Schwab executive here. Trust me, Schwab's goal is to make money: that's a fact, not a criticism. There are many ways to attract clients in order to do that, including fair pricing, responsive customer service, and a superior online experience via the website and brokerage platform. Comparing, for example, Schwab's trading platform with that of Vanguard is an apples-to-oranges, 20th vs. 21st century undertaking. (How it compares to TDA's I don't know.) I'm sure Schwab feels it has already compensated the appropriate parties for its acquisition of TDA accounts. Of course there is a certain tension between Schwab's interests and those of its customers which is why it doesn't offer all of its services for free. That's in the nature of every business. I can't think of any prior Schwab acquisition that resulted in payments to acquired customers.
  • beebee
    edited October 14
    @msf,
    Could you clarify? You suggest that Schwab is treating one class of customers (not potential customers) different from others. That sounds like you're saying that once TD Ameritrade clients became Schwab customers (via acquisition) they were no longer eligible for bonuses.
    Yes, in fact, once I became a Schwab customer after one of my small USAA accounts was acquired during the USAA/Schwab brokerage merger I was boxed out from the new customer bonuses. I get that I am not a new customer, but these offers are usually tiered. Companies like Xfinity do this all the time with there new customer offers while longtime customers have their service fees remain elevated in comparison. What is "a new customer" in the eyes of a company? I have ended service, switch service providers just to meet their definition of what a new customer is.

    My point is that these bonus offers are often tiered. If an existing customer brings more AUM over I would expect an existing customer would receive that tiered incentive. That seems fair.
  • edited October 14
    IMO Schwab's StreetSmart Edge is lightyears behind TDAmeritrade's ThinkDesktop - plus their Mac 'version' feels like a quirky Java-based browser plugin that's nowhere as polished as ThinkDesktop. SSE reminds me of the hideous OptionsXpress active platform that repeatedly burned me 15 years ago and what led me to ThinkorSwim.

    Until ThinkDesktop gets integrated into the Schwabverse, I'm going to grumble quietly b/c I would do all my stock/option buy/sells in that app versus the website. That said, I'm keeping some $$ at TDA both for account/record access and if I want to active trade or charting using my own indicators/scripts.
    sfnative said:

    Former Schwab executive here. Trust me, Schwab's goal is to make money: that's a fact, not a criticism. There are many ways to attract clients in order to do that, including fair pricing, responsive customer service, and a superior online experience via the website and brokerage platform. Comparing, for example, Schwab's trading platform with that of Vanguard is an apples-to-oranges, 20th vs. 21st century undertaking. (How it compares to TDA's I don't know.) I'm sure Schwab feels it has already compensated the appropriate parties for its acquisition of TDA accounts. Of course there is a certain tension between Schwab's interests and those of its customers which is why it doesn't offer all of its services for free. That's in the nature of every business. I can't think of any prior Schwab acquisition that resulted in payments to acquired customers.

  • In USAA's case, their customers are also their shareholders so in sense I should see some of these dollars making improvements at USAA.

    There is an increase in USAA's revenue and thus an addition to its balance sheet. What USAA will do with that money (improvements, premium credits, whatever) is a different question.

    As near as I can tell, the USAA owners are its policy holders, not all its customers. It was formed as a mutual insurance company. Ownership by policy holders is what "mutual insurance" means. USAA seems emphatic in stating that "Use of the term 'member' or 'membership' refers to membership in USAA Membership Services and does not convey any legal or ownership rights in USAA." (Many USAA pages have this footnote.)

    So like Vanguard, only the a subset of its customers - not the brokerage customers - would benefit from the sale.

    See also this page that seems to say that how well the company does determines dividends to (only) insurance policy holders.
    https://communities.usaa.com/t5/Investments-and-Education/How-do-I-buy-stock-in-USAA/qaq-p/160763
  • Companies like Xfinity do this all the time with there new customer offers while longtime customers have their fees jacked up.

    Ah yes, the practice of benefiting new customers at the expense of existing customers. It's very common, though not often as blatant or infuriating as with cable companies.

    How often do you see offers like: 20% off for first purchase by new customers, or: sign up for our newsletter and get X? It's a way of acquiring customers. Once acquired, some businesses assume that their customers are sticky. Banking for example - they assume that you'll put up with 0.01% interest because it's too much effort for you to move accounts.

    You've identified one of the worst offenders - cable companies. Their "locked in rates" creep up month by month. They figure you won't notice or care about a dime here, a buck there. And when that "lock" expires, you have to go begging for a deal that's half as good as new customers get. They're betting that many people won't even ask; that few will walk without asking first. They're probably right.
  • Cable thieves. Don't even..... So, back East, I "bundled" with Comcast. Then I ditched the landline phone--- after an election day in which the phone never stopped ringing from stoopid, useless, worthless, time-wasting goddam political calls. And some were ILLEGAL robo-calls, just recorded messages. The politicians get away with that because in the pertinent laws, they always exempt themselves. ..... So we kept internet and tv. Two of three services. But the BILL did not go down by one-third. Then we killed cable tv. Screw 'em. We were using just one offered service, out of three, previously. But the bill was reduced by only $20.00 or $30.00. Extortionist motherlovers.

  • I know we're getting way off topic for this thread but I was paying $90/mo for Comcast for internet only b/c I didn't need phone or cable, and wouldn't bundle just for the sake of bundling stuff I didn't use and giving them more subscriber counts. I got an offer for FIOS for what's essentially $35/mo for better-quality, symmetrical 100MB internet access (plus a year of Disney+ for free) and I am *very* pleased. At least Verizon worked to earn my business -- unless I callto threaten cancelling, Comcast just expects me to bend over every year (just like SiriusXM does).
    Crash said:

    Cable thieves. Don't even..... So, back East, I "bundled" with Comcast. Then I ditched the landline phone--- after an election day in which the phone never stopped ringing from stoopid, useless, worthless, time-wasting goddam political calls. And some were ILLEGAL robo-calls, just recorded messages. The politicians get away with that because in the pertinent laws, they always exempt themselves. ..... So we kept internet and tv. Two of three services. But the BILL did not go down by one-third. Then we killed cable tv. Screw 'em. We were using just one offered service, out of three, previously. But the bill was reduced by only $20.00 or $30.00. Extortionist motherlovers.

  • edited October 18
    “plus a year of Disney+ for free”

    Paid $70 for a year of Disney plus. About 8-10 good shows. Than ran out of stuff to watch.:)
    Several animations are quite good if into that type stuff. Hamilton’s very good. But not as enjoyable as seeing it live, which I did.

    Stuck with 4G for internet. Unlimited now. Able to stream movies for first time. Waiting for Musk to get his stats running.
  • For current TD Ameritrade clients, in case you hadn't heard yet, Schwab and TDA are allowing current TDA clients to transfer their accounts early to Schwab without incurring the account closing fees of $75 per account at TDA. We have begun the transfer process ahead of the mass forced transfers coming down the road.

  • My TDA guy suggested I leave a foothold in my TD account to keep it active in order to have easy access to my records, statements, tax forms, etc. So I'm doing just that by leaving a few dog stocks DRIPing into themselves --- but otherwise I've been moving the rest of my TDA to Schwab in large chunks every week or so.
    Roy said:

    For current TD Ameritrade clients, in case you hadn't heard yet, Schwab and TDA are allowing current TDA clients to transfer their accounts early to Schwab without incurring the account closing fees of $75 per account at TDA. We have begun the transfer process ahead of the mass forced transfers coming down the road.

  • Charles Schwab to Cut 1,000 Jobs in TD Ameritrade Integration

    The move will trim the combined workforce by about 3%, San Francisco-based Schwab said Monday in a statement. The cuts are part of an effort to reduce “overlapping or redundant roles.”

    https://www.bloomberg.com/news/articles/2020-10-27/charles-schwab-to-cut-1-000-jobs-in-td-ameritrade-integration?srnd=premium&sref=368neHRO








  • As expected, investment services jobs will continue to be cut. IT eliminated many jobs in the past and it will continue to eliminate more middle and high salary jobs.
    It's also a run to the bottom with fees too. Who can offer the same/more services for zero-lower fees and why you have seen mergers.
  • edited October 29
    (1) Will Schwab honor TDA customers' grandfathered mutual fund commission rates of $15 for mutual funds like Primecap or Vanguard? I came into TDA as an old Waterhouse customer.
    (2) Will Schwab allow monthly repeat purchases in these funds without transaction fees after the initial purchase (with a one-time commission)? This was something I liked about TDA.
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