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Charles Schwab's $26 billion purchase of rival TD Ameritrade is just four days away.
While the full integration of TD Ameritrade is expected to take 18 to 36 months following the Oct. 6 close of the deal, there are steps advisors should take now to address possible client concerns — and their own.
"Hope for the best and be patient," said Joel Bruckenstein, head of Technology Tools for Today. "No matter how good the transition team is, and they are good, there will be some disruptions."
For advisors expecting a perfect process, "you will be disappointed," Bruckenstein explained. It likely should go "relatively smoothly, but not perfectly."
Speaking broadly, the tech events producer and blogger said: "Some glitches are almost inevitable. It is difficult to predict exactly where they will happen, but it is likely that they will."
For advisory firms at the lower end of the assets under management range, there's been industry chatter about possible service issues.
"There is some justification for their concern, but since Schwab hired Tom Bradley, I have a higher degree of confidence that issues will be addressed," Bruckenstein said.
(Bradley, the former president of TD Ameritrade's Retail and Institutional businesses, joined Schwab's Advisor Services business on Jan. 13 to oversee custodial services for RIAs with up to $100 million in assets.)
"The two firms have different cultures," Bruckenstein said. "From a human resources perspective, it will take a while to manage that."
For now and until the account conversion is done 18-36 months from the deal's closing, Schwab and TD Ameritrade "will continue to operate as separate broker-dealers, and clients of the two firms can continue to do business with their respective companies … and can expect access to the same products and same level of great service," Schwab said in a statement.
Put Clients First
As the process moves along, though, advisors' investor clients "may feel something bigger is happening" than may technically be true, said Angie Herbers, chief executive of the consultancy Herbers & Co. "So, it's important for all firms, especially during the pandemic, to communicate more often and be very transparent about any changes in client services."
Schwab has said TD Ameritrade clients won't have to do paperwork or make other changes to their accounts.
Asked when the branding on paperwork could change, the brokerage firm said: "We remain in the planning stages of the integration and have no decisions to announce about future plans at this time. We are committed to being as transparent as possible and will communicate decisions when appropriate throughout the integration process."
While there may not be any "repapering" of RIA clients, "there may be perception changes," Herbers said. "We are talking about people's money, and so clients should have Schwab on their statements in the future."
This is what matters most, she explained. "It's the perception of change that is the reality [for clients] and their custody will be at a different palace" when the integration process is completed.
For advisors caught up in the merger, "Keep an eye on client service, and communicate about change," Herbers said. "This is really important."
When it comes to other changes, like branding, that are expected down the road, "Do what is best for your clients," she added. This means staying focused on client relations — what is best for them and what they need — and how you should best approach client services.
"We suggest talking to clients and saying, 'This is happening, though we cannot do anything about it,'" Herbers said. Since clients worry about technology changes and shifts in policies and procedures, advisors need to lend an empathetic ear and listen to their fears.
"The core issue is what's best for clients and staying focused on that when there may be a major transition," the consultant said.
Schwab likely will "over-communicate and soothe worries [and] very little will change in the short term," said Doug Fritz, CEO and founder of F2 Strategy.
But for advisors who either left Schwab for TD Ameritrade or picked TD Ameritrade because it was "unique and different from Schwab, the seams will start showing over the next 12 months," Fritz said. "I have no reason to believe that Schwab can (or wants to) keep the TD culture of service and attention for smaller firms."
Go Shopping & Prepare to Fix Workflows
Advisors "should definitely explore their options and [see] what else is out there, because this may not be what they want," said Tim Welsh, head of the consultancy Nexus Strategy.
