Will Charles Schwab's Bold Moves Pay Off for Investors?
Changes in the asset management business are expected to lead to more industry consolidation. Firms have been riding a long bull market, but that ride is expected to get bumpier with increased market turbulence. There are other trends afoot as well, such as a shift from active to passive investing, necessary investments in technology, and pressures toward lower fees.
These are among the trends that will force companies to explore mergers and acquisitions to gain the scale they need to compete in a more difficult environment. One of the biggest deals is Charles Schwab's (NYSE: SCHW) acquisition of rival brokerage TD Ameritrade for $26 billion. The deal won't close until later this year, but if and when it's done, it will, in effect, take out a main competitor and solidify Schwab as a top-three asset manager in assets under management (AUM). As of Dec. 31, Schwab has $4 trillion in AUM. When you add TD Ameritrade's $1.3 trillion, Schwab would have $5.3 trillion, which would make it the third largest, behind BlackRock and Vanguard.
It was one of the "bold" moves the company has made to improve client and shareholder value, Schwab CEO Walt Bettinger said in the fourth-quarter earnings release. Will it pay off for investors?
Source Fool.com
