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Schwab-TD deal: No repapering for RIA clients; DOJ wants more info

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ORLANDO, Fla. — Advisors who custody with TD Ameritrade won’t have to repaper clients after the expected acquisition by Charles Schwab, TD Ameritrade Institutional’s Tom Nally said at the custodian’s annual — and maybe last — LINC conference.

“For the vast majority of accounts, you will not have to repaper,” Nally said Thursday morning to the applause of advisors, adding there may be exceptions for certain accounts.

It was a critical piece of information for advisors as the industry’s two largest custodians move toward the proposed acquisition. TD has approximately 7,000 RIAs on its platform; Schwab has about 7,500 (some advisors custody at both firms).

The deal, however, may not close quite as quickly as first thought. Nally said it had been slightly delayed, pointing to the 8-K document Schwab and TD Ameritrade filed last night with the SEC, which said that the antitrust division of the Department of Justice has requested additional information from the companies. Nally said they weren’t surprised by the request, and that they still expect the transaction to close in the second half of 2020.

“This is really the first time the DOJ is examining our industry. They have to understand the complex workings of how we operate, how the industry functions,” he said.

After the companies comply with the request, the “waiting period” under antitrust laws will extend for 30 days, according to the filing.

Nally sat on a barstool on stage, addressing 2,000 advisors attending TD Ameritrade Institutional’s 24th annual conference, and promised his team would answer what questions they could in a Q&A after the presentation in the exhibit hall.

Tom Nally, president of TD Ameritrade Institutional, sat on a barstool on stage to address 2,000 advisors at the custodian's 24th annual LINC conference.

The deal “was actually a big surprise to all of us as well,” Nally said, noting that they had been getting “peppered with questions,” from advisors on the firm’s platform. “We recognize that it has an impact on all of you as well as all of us.”

Right now, TD Ameritrade is limited in what it can say, even internally, due to regulatory restrictions, he said.

“Any discussions that have happened have been limited to a very small number of associates” that would be involved in the integration planning. The discussions have not been about business operations yet, he said. “We haven’t been able to make any key decisions or even start to do analysis on the decisions,” he said.

Though the company didn’t have answers for many RIAs’ questions, TD will communicate information as it becomes available, Nally said.

It is unclear what will happen to TD Ameritrade’s Veo platform, which integrates with 175 different third-party tools and applications, according to the firm, “we just don’t know. We haven’t had those conversations,” Nally said.

Both Schwab and TD Ameritrade have different technologies, and the companies will analyze which platform will be best for advisors moving forward. He reminded RIAs that it will be about two to three years before anything moves, “and we don’t even know what that means.”

Will there be a 2021 LINC conference?

“Right now we don't know the answer to that,” he said, but noted that their conference team is planning ahead as if there will be. “Obviously that could change, but that’s how we’re operating.”

As soon as business discussions can begin, Nally said the first issue they will raise with Schwab is how service and sales relationships could be affected. “We know this is top of mind for everybody,” he said. “We’ll address that first thing out of the gate.”

Many questions and concerns remain. The deal has garnered criticism and questions from small advisors and broader speculation of things such as wealthtech innovation.

Nally recommended advisors not to “sit on the sidelines” and get stuck in a holding period. TD Ameritrade will finish updating all its RIAs to Veo One by the end of this year. The custodian is launching a new program to train associate advisors, with a leadership and development course that will take place in the company’s offices in Southlake, Texas, according to a press release issued by the firm this morning.

Later this year will be the launch of RIA Connect, a tool to connect RIAs to buying and selling opportunities, as well as to help advisors find and hire interns and associates.

At the end of his presentation, Nally thanked RIAs for being clients of the company. “We at TD Ameritrade are so happy we’ve been part of this story,” he said.

He had hopeful words to leave advisors: “We know for all of you in this room: The best is yet to come.”

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