Charles Schwab to buy TD Ameritrade (opens in new tab)

(cnbc.com)

12 pointssksk6y ago5 comments

5 comments

This is positioning them to increase prices. CS is tired of discount brokers like Ameritrade under-cutting them, so they're going to try and buy out a handful and see if they can pay for it with fee increases.

How long until Robinhood gets purchased? I'd be surprised if it wasn't consolidated this time next year.

whyhow6y ago

I think you actually have things backwards. Charles Schwab cut their trading fees before Ameritrade did and this move to $0 trading fees affected CS less than Ameritrade because CS makes more money from other sources.

An interesting article about it: https://www.bloomberg.com/opinion/articles/2019-11-21/schwab...

beatgammit6y ago

I think most brokerages make the bulk of their money on interest for margin trades and management fees. I read about Fidelity's new 0% ER funds (e.g. FZROX), and it's a loss leader for their larger margin business.

Schwab has a good business going with offering mutual funds and retirement accounts, but I don't think they have a solid margin business, but I think TD Ameritrade does, which is likely why they're making this acquisition.

Ancalagon6y ago

I agree with this sentiment but I feel like the barrier for entry for another discount broker is rather low right? If RH gets bought I assume another startup will rise to fill that space now that the business model has been proven.

lawrenceyan6y ago

This must really hurt for E-Trade. They're getting boxed in on both sides now, with Robinhood beating them in the discount brokerage market and the soon to be Schwab/TD on the premium side.

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