Why Charles Schwab and TD Ameritrade are celebrating a $1.3T snooze fest

September 5, 2023 7:32 PM

In the wake a massive account transition that saw more than 7,000 advisory firms and $1.3 trillion in total assets move to Charles Schwab's platform from TD Ameritrade, that smattering of complaints is the best a trio of Schwab execs could come up with when asked what fires they were putting out on day one.

Missing from the Labor Day weekend undertaking that involved the conversation of 3.6 million advisor clients and another 3.6 million retail clients were complete collapses that led to work not getting done.

Instead, phone calls placed to support staff throughout the event were akin to the annoyances and hiccups associated with returning to a dormant Apple TV account whenever a new season of "Ted Lasso" premieres.

"It's all about logins, passwords resets … mostly it's a lot of check-ins and that's about it. Really, so far, it's kind of boring," said Tom Bradley, a managing director for Schwab Advisor Services. "Maybe it'll pick up a little bit in terms of excitement. But so far, the calls are fairly mundane."

A dull start to a big deal, but the tone was celebratory Tuesday afternoon as Bradley, Schwab Advisor Services Head Bernie Clark and Managing Director Jess Heffron discussed the most important day for financial advisors on a Schwab-TD Ameritrade merger journey that started three years ago.

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The $22 billion acquisition closed in October 2020. The shuffling of accounts from "green" to "blue" has been a rolling process with this year's Memorial Day weekend, Labor Day weekend and a weekend in early November being marked as key operational moments along the way.

The transition will end with a small group of client accounts moving over during the first half of 2024. The goal is to avoid investing and trading disruptions for clients and advisors.

By the latest company counts, TD Ameritrade and Schwab provide custodial services to a combined network of more than 14,000 RIAs. In total, between 18 million and 20 million accounts will be moved over the course of the entire integration, according to Schwab officials.

Post-integration, areas of focus for the merged entity include ongoing automation and efficiency improvements, modernization of books and records for the broker-dealer and workplace solutions, and rationalization of data centers and applications.

For Clark, the weekend was very much a "no news is good news" moment. Transition complete, the focus is now on the next step. And the fact that he and his team were able to get to this step with a fairly low amount of friction tells him that work put in before the big day is paying off now.

Schwab Advisor Services Head Bernie Clark

"We're really proud of what we've done here. But we're not flawless. We tend to talk about the positives, and often the world likes to hear the negatives," Clark said. "I want you to hear our pride. I want you to hear our passion around what we're doing. We're not ever going to ask for forgiveness. We may just ask for time sometimes to correct things. Give us a chance to make it right."

He added that making good on those opportunities to get right have always been part of the Schwab mantra, and maintaining that mindset with the addition of TD Ameritrade is something that is critically important to continue to be a major player as the business continues to evolve.

"We're going to be there and we want to be a leader in that business," Clark said. "And we welcome all the competition that comes because it makes us better."

Scroll down to see some of the major takeaways as Clark, Heffron and Bradley recapped the account transition during a call with reporters and industry analysts.

Are you an advisor that has been impacted by the Charles Schwab-TD Ameritrade merger? If so, has your experience been good, bad or ugly? Reach out to Financial Planning Reporter Justin Mack at justin.mack@arizent and share your story.

Getting the reps in

Practice makes perfect, and in the case of the advisor account transition, Heffron said the previous rounds of account migration certainly made a difference.

"We were actually part of the initial one in February, and that yielded a lot of learning that actually shaped a lot of the training that we put together for advisors over the summer," she said. "There's a huge army that is working behind the scenes on this. … They've gotten better and faster with every conversion. So just happening to go over (during) Labor Day and kind of being in the third position, we were major beneficiaries of things that they've picked up on."

But plenty of credit was given to advisors themselves who Heffron and Bradley praised for their high level of engagement throughout the process.

Heffron said information and marketing materials have been going out to impacted advisors more for a year, and more than 15,000 questions have been fielded through webcasts and other informational sessions.

"Our advisors for the most part have been better prepared than I've ever seen. We all know that advisors, sometimes it can be tough to get their attention. But we certainly were very successful in doing that," Bradley said. "And kudos to our advisory clients. … They really took advantage of the extensive training that we made available to them. And as a result, we're getting a lot of phone calls, but it's all basic stuff. And, frankly, we're not seeing any issues of any significance whatsoever."

A matter of size

Despite the transition itself being described as going "spectacularly" by Clark, an initiative of this size with so many individuals caught up in it means that a truly uniform experience remains an impossibility.

During Tuesday's call, the Schwab execs were asked to respond to criticisms from smaller firms who feel they were given less attention than larger organizations during the move. Bradley said it is important to keep in mind that 80% of Schwab's advisors have AUM of $300 million or less, and that all firms were provided the same opportunities to connect with firm leaders as changes were made.

In addition to acknowledging the large number of smaller firms served by Schwab, Clark said his team has learned over time that each advisory client has a different level of complexity within their operations, which sometimes manifests itself in size.

But ultimately, each firm needs something different.

"Some use us as volume transactional relationships. Some use us as thought partners and consultants. And so how we deal with our clients is often directed by their business model, not necessarily their size," Clark said. "I think that gets a little lost, sometimes in the vernacular of size. In those kinds of things, we try to make it more about the needs of the advisor and how they want or need to use us."

The marathon continues

While the vibe was very much victory lap, the work is far from over.

During the call, Technology Tools for Today (T3) Conference Producer Joel Bruckenstein called the transition a major accomplishment, but said the first day of trading and reconciliation will be the real test.

"So I think before you circle the wagons and say this has been a total success, we need to see how tonight goes," he said.

Clark said that his team's "big morning task"is to make sure that all Schwab's partners in the industry can get the information they need around the reconciliations, and to make sure those partners are making the data available to those that are using them.

"You know the group I'm talking about. The Envestnets and the Orion's and a host of other third parties that we've worked diligently with … they had to step up as well, to make sure that this was all going to be a success," Clark said in response. "And I love the fact that you think it's a one-day worry. I think I'm gonna be worried all week."

Heffron said this was obviously a big weekend for the organization, but they're looking at it as a year of firsts. Wednesday will be the first big "data file" day, but their calendar is full of mini milestones that will tell the story of the transition.

"Looking ahead, you even have the first month and quarter end. Given the timing of this, year-end tax season is coming up. We're not quite (back to) business as usual," she said. "That settling in period, that definitely is top of mind for us and continuing the support for our newly transitioned advisors."