In a deal that would combine two of the largest online brokerages, TD Ameritrade announced plans Monday to buy Scottrade Financial Services for $4 billion.
The move would bring clients of both companies under one roof, merging two well-respected brands in the online broker business: TD Ameritrade is widely known for its advanced trading platforms such as thinkorswim — also the result of an acquisition — and Scottrade has earned a reputation for its in-person customer service. This deal aims to retain and combine the best of each.
Both companies have contributed to the growth of low-cost online trading, bringing small-dollar investors the ability to trade stocks for commissions of less than $10. TD Ameritrade president and CEO Tim Hockey said his firm remains committed to removing the barriers between individual investors and Wall Street.
“We’ve found in Scottrade a partner with an equally strong passion and a proven track record for delivering exceptional client experiences,” he said in a statement announcing the deal.
What the deal means for customers
Customers of either brokerage wouldn’t see any account changes until the deal closed, which could take a year.
Missouri-based Scottrade offers a smaller selection of investment products: stocks, bonds, mutual funds, exchange-traded funds and options. Nebraska-based TD Ameritrade would add commission-free ETFs, forex trading and futures to that list. Scottrade customers would benefit from that wider selection, as well as from TD Ameritrade’s innovative trading platforms for desktop, web and mobile investing.
Meanwhile, TD Ameritrade’s branch network would more than quadruple with the acquisition of Scottrade’s nearly 500 locations. TD Ameritrade said the majority of those branches would remain open, noting in a list of frequently asked questions for retail clients that one goal of the deal is to improve its ability to provide in-person client support, investor education and goal planning.
This move comes as many online brokers have launched online advisory arms to connect clients with robo-advisors, and investors increasingly are moving toward index funds and away from stock trading and active management.
TD Ameritrade and Scottrade together have nearly $1 trillion in total client assets and average 600,000 client trades per day, according to the news release. The companies and their retail branches would remain separate until the deal closed, which is expected in September 2017, pending regulatory approvals. Scottrade accounts would then be converted to TD Ameritrade.