Rival custodians circle Schwab-TD deal, looking for clients

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Fidelity sends solicitation letter to thousands of advisers.

In anticipation of massive fallout from the pending $26 billion Charles Schwab-TD Ameritrade merger, competitors are wasting no time putting out the welcome mat for registered investment advisers who may want to switch custodians.

Fidelity Investments, which along with Schwab, TD and Pershing Advisor Solutions represent the Big Four industry custodians, sent an email on Thursday to thousands of RIAs likely to be disrupted by the Schwab-TD consolidation of more than 12,000 RIAs and more than $2.5 trillion of assets onto a single platform.

The Fidelity letter, which was obtained by InvestmentNews, stresses Fidelity’s private-company status, its 78-year history, and juxtaposes its $7.7 trillion in total assets under administration against the $5 trillion in combined assets under administration by Schwab and TD.

Asked to respond to the adviser solicitation, which sources say is the largest such solicitation ever by the Boston-based company, David Canter, head of the RIA segment at Fidelity Clearing & Custody Solutions, said, “We believe it’s important for firms that custody with our competitors to understand the value that Fidelity offers.”

“We know that the pace of change in our industry isn’t slowing down, which is why now, more than ever before, it’s important for advisers to have a clear understanding of who they’re working with and what their mission is,” he added. “As a private company, we are focused on our clients, not just fluctuations in our stock price or a long and complex integration of two businesses.”

While Pershing has not yet undertaken anything as formal as a mass mailing to RIAs, the potential fallout is clearly in its sights.

“We are in a unique position in the market as the sole business-to-business custodian that does not compete head-to-head with RIAs,” said Ben Harrison, managing director at Advisor Solutions at BNY Mellon’s Pershing.

“Recent developments in the market make Pershing a highly attractive choice for RIAs who feel that eliminating channel conflict is an important component of a custodial relationship,” he added. “We are circling back with RIAs who use other providers to retell our story in light of recent disruption. We are also actively responding to inbound inquiries from advisers looking at their options.”

It’s a similar story at E*Trade Advisor Services, which views itself as a “scrappy player” that could be attractive to advisers custodying with Schwab or TD once they realize they will likely have to repaper all their client accounts anyway.

“Make no mistake, this consolidation is a huge opportunity for us, so we’ve been firing on all cylinders,” said E*Trade senior vice president Gabriel Garcia, who said in addition to outbound efforts, “inbound inquiries have been exceedingly strong.”

The potential for change and business disruption in the massive Schwab-TD deal that is not expected to close until the middle of next year, is not lost on RIAs.

“We currently custody at both TD and Schwab, and we actually reached out to Fidelity to inquire about custody services to determine if they would be a good addition to our current custodian lineup,” said Thomas Balcom, founder of 1650 Wealth Management.

Linda Farinola, founder of PFG-Financial Planning & Management, currently custodies at TD and said “ETrade Advisor Services is emailing or calling a few times a week.”

Geoffrey Owen, wealth manager at GreerWalker Wealth Management, expects the solicitations from custodians to “ramp up after the holidays when competitors have had a change to cull their lists to determine who is using Schwab and/or TD.”

“We are watching this closely due to concerns about the change and general concern about Schwab increasingly opting to go directly to the consumer with disregard for their RIA community,” he added.

A spokesman for TD referred a request for comment for this story to Schwab.

A Schwab spokesman emailed the following comment: “These tactics, while not surprising, are regrettable in their transparent opportunism. We stand by our long history of serving independent advisers and the depth and breadth of expertise that our ‘through clients’ eyes’ strategy delivers. We remain focused on serving independent advisers of all sizes and will continue to provide deep levels of service and value-add solutions that our scale uniquely enables us to offer.”