Charles Schwab, which represents almost 50% of all independent RIA custody businesses, plans to buy TD Ameritrade according to CNBC sources.
Fox Business reported that Schwab would pay 26,000 million for the company.
In theory, the combined firm will be led by Schwab CEO Walter Bettinger, and TD Ameritrade chief financial officer Steve Boyle will lead his company until the agreement is completed.
It is not clear if the acquisition would face antitrust problems since Schwab and TD Ameritrade are the two largest publicly traded brokers and an agreement would create a giant with 5 trillion dollars in combined assets.
The discount brokers sector has been under pressure recently since the ‘zero commissions’ for the negotiation of shares, ETFs and options, arrived, which has caused brokers to struggle to find ways to up their profits, decision which gave Schwab an advantage, since the commissions represented only about 4% of its revenues, while for TD Ameritrade, the commissions represented more than 10% of the revenues.
For RIAs, whose custody business is an activity that generates 40% to 50% of the operating income of most discount brokers, the acquisition would eliminate an important option among custodians. Schwab is the leading custodian for RIAs, while Fidelity and TD occupy second and third place, followed by Pershing Advisory Services and E * Trade.