Charles Schwab Corp. CFO proclaims TD Ameritrade RIA conversion a 'tremendous success,' but Wall Street dour after he also disclosed TDA-'originated' $20-billion-plus assets flowed out in August

The Charles Schwab Corp. Labor Day conversion of TD Ameritrade (TDA)  RIA accounts is now officially a “tremendous success” and it comes with receipts, says Peter Crawford, its chief financial officer.

Yet, just enough TD Ameritrade investors – both retail and RIA – are deserting ship and taking tens of billions in assets with them, displeasing Wall Street in the process. 

TD Ameritrade-related attrition took a $23-billion bite out of net-new-assets (NNA). Total core net new assets across all Schwab and TDA clients totaled a low $4.9 billion in August.

The exodus pounded Schwab's August numbers – even if the figure is not indicative of the greater success of the merger.

Schwab's CFO says Schwab-originated accounts are behaving in exemplary fashion and delivered net new assets of $28.1 billion for August.

But total Schwab client assets slipped to $8.09 trillion in August, down 2% from July 30 but up 14% from Aug. 30 a year ago.

The client behavior under the two brands is so abjectly bipolar that Schwab actually is charting it to reassure investors that the TD Ameritrade brand's asset seepage is not contagious to its own brand.

Silver lining

“Today’s release provides a break-out of asset flows for clients whose accounts were opened at Schwab versus those initially opened at Ameritrade," Crawford says. 

"The break-out helps illustrate that core NNA from Schwab originated accounts continues to be robust – up 15% year-to-date relative to the same period in 2022.”

Crawford pointed out those dark outflow numbers have a silver lining for Schwab shareholders – willing to absorb the nuance of disclosures and earlier projections.

“Attrition levels are measurably better than what we communicated at the time we announced the acquisition in November 2019," he writes in the release. 

Crawford went to great lengths to show that the TD Ameritrade asset-outflow-itis, is not a flu that can mutate and affect Schwab investors. The new chart helps demonstrate the point.

"The majority of these deal-related outflows have been attributable to Ameritrade RIA clients, including a select number of relationships that did not meet our criteria for an ongoing service relationship.” See: Schwab 'proactively resigns' TD Ameritrade RIA custody clients, which accounts in part for July's $20-billion net new asset [from June] hiccup

Wall Street dour

The explanations did not cheer Wall Street investors and Schwab shares (SCHW) fell to $58.22, down 2.58% on the day, a steeper plunge than the 1.56% drop in the Nasdaq. 

That's about where the stock has traded much of the past six months since it was clobbered in March by a scare over its bank's absorption of tens of billions of dollars in paper losses on bonds.

The Crawford news about TDA RIAs needed no such qualifier – affirming earlier reports but offering more supporting numbers and historical context.

“Our Labor Day Weekend conversion of former Ameritrade clients was a tremendous success," he says in the release. 

"The latest conversion weekend was approximately 40% larger than the May cohort in terms of total accounts and would by itself be the largest brokerage firm conversion in history.

"In total, we migrated $1.3 trillion in client assets from over 7,000 Registered Investment Advisory (RIA) firms and 3.6 million retail accounts.

"Perhaps even more impressive, the amount of assets converted earlier this month was equivalent to the total Ameritrade client asset base at the time the acquisition was announced in late 2019. 

“Following the Labor Day conversion, we have not observed any meaningful disruptions in the overall client experience and service volumes have already normalized to pre-conversion levels,” he says.

Yet, apparently some TDA investors – sold on the brand in part as the anti-Schwab – will not be appeased simply by a lack of disruption.  The effect of TDA asset outflows is expected to last well into next summer, Crawford says.

For now, the TDA asset outflows seem to be only accelerating with the August $4.9 billion net, down from $13.7 billion in July and $33.8 billion recorded in June.