It is an interesting time for Charles Schwab [NYSE:SCHW] as it acquired one of its key competitors, TD Ameritrade, to become one of the world’s largest brokerage firms. The $22 billion deal will see Charles Schwab grow to a client asset base of $6 trillion and 28 million brokerage accounts.
This means TD Ameritrade was adding about 12 million client accounts to the combined entity and $1.3 trillion in client assets. Commenting on the deal, Charles Schwab president, Walt Bettinger said that, they were looking forward to using the two companies’ combined strengths to eliminate barriers for investors by lowering costs and giving them better trading technologies. The move is likely to also drive up the company’s revenues going into the future and by extension its stock value.
At the same time, Joe Moglia, the former chairman of the board at TD Ameritrade, announced that he will be relinquishing that position as Schwab merges with the online broker. In an internal video bidding TD Ameritrade Associates, Moglia says that it was a difficult decision but one that was necessary and good for everyone.
Moglia ascended to the position of CEO of TD Ameritrade (then Ameritrade) in 2001. At the time Ameritrade was a struggling firm on the brink of bankruptcy. It was worth a paltry $700 million, with total client assets of about $24 billion.
As the company CEO, Moglia saw Ameritrade transform immensely in just seven years. By the time he was stepping aside to become the chairman of the board in 2008, the company’s capitalization stood at $10 billion and its shares had risen by 500%.
Currently, the TD Ameritrade clients’ assets stand at approximately $5.5 trillion. His exit shows that Charles Schwab wants to be in full control of the new entity’s strategic direction. This could see the company grow much faster going into the future, which is good for market consolidation.
Over the last few years, there has been an increase in competition from smaller, but more techy brokers. With the new entity and a unified strategy, Charles Schwab is uniquely positioned to grow going into the future.
About Charles Schwab
Charles Schwab provides wealth management, asset management and other financial advisory services. It is based in San Francisco, California.