Charles Schwab completes migration of TD Ameritrade clients
Charles Schwab completes the migration of TD Ameritrade clients, JPMorgan partners with Gusto to offer online payroll services, and Discover considers selling its student lending business
There were a few publicly traded brokerages in the United States before 2020, but then Charles Schwab bought TD Ameritrade (at the time of acquisition, the company had 14.5 million accounts and $1.6 trillion in Assets Under Custody), and Morgan Stanley bought E*TRADE (5.2 million accounts, $360 billion in AUC). Last week, Charles Schwab completed the migration of TD Ameritrade clients to its platform. More on that in today’s newsletter:
Charles Schwab completes the migration of TD Ameritrade clients,
JPMorgan partners with Gusto to offer online payroll services, and
Discover is considering selling its student lending business
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Charles Schwab Completes Migration of TD Ameritrade Clients
Over the Labor Day weekend, Charles Schwab (NYSE: SCHW) completed the final step in acquiring TD Ameritrade. They moved over 7,000 advisors, nearly 4 million client accounts, and $1.3 trillion in assets from TD Ameritrade to Schwab's platform. This transition had been in the works for years since Schwab announced its purchase of TD Ameritrade in 2019. Despite facing challenges like dealing with the impact of the pandemic on in-person meetings, or a stock price drop earlier in the year, Schwab executed the transition smoothly, thanks to months of preparation and the cooperation of investment advisors who were already familiar with both companies' systems.
Nevertheless, some advisors and investors chose to leave before the Labor Day weekend. Thus, in August, Charles Schwab experienced a significant decrease in core net new assets, which dropped to $4.9 billion compared to $43.3 billion the previous year and $13.7 billion in July. The company’s management attributed this decline to the temporary loss of TD Ameritrade clients and advisors as part of the integration process. Excluding TD Ameritrade clients, Schwab reported core net new assets of $28.1 billion. Charles Schwab announced the acquisition of TD Ameritrade in late 2019. The all-stock transaction valued TD Ameritrade at approximately $26 billion, with Charles Schwab paying a 17% premium over the market price.
✔️ Charles Schwab Net New Assets Fall on TD Ameritrade Attrition
✔️ Schwab’s $1.3 Trillion Weekend: Company Converts Hordes of TD Ameritrade Clients, Advisors
✔️ The Charles Schwab Corporation to Acquire TD Ameritrade
JPMorgan Partners with Gusto to Offer Online Payroll Services
JPMorgan Chase (NYSE: JPM) has partnered with San Francisco-based Fintech company Gusto to provide digital payroll processing services to its 5 million small business customers. The payroll service, set to launch by the end of 2024, will facilitate salary disbursement, generate tax documents and pay stubs, and handle filings with local and national agencies. This move is part of JPMorgan's broader strategy to remain competitive in the evolving landscape of financial services. By offering payroll services, JPMorgan aims to compete with Fintech giants like Square (NYSE: SQ) and PayPal (NASDAQ: PYPL), which have expanded their offerings to include payroll services.
Gusto, founded in 2011, serves 300,000 small and medium-sized businesses and competes with both traditional and newer payroll service providers, including ADP, Intuit, Paychex, and Rippling. The company was last valued at $9.6 billion, and according to Techcrunch, generated over $500 million in revenue during its most recent fiscal year ending on April 30, 2023. “Building payroll at national scale requires deep knowledge and understanding. With Gusto, we are able to decrease the time to offer a leading payroll service while increasing the value we’re able to deliver to our customers,” commented Jessica Young, Chase Payment Solutions, on the partnership.
✔️ JPMorgan Chase to offer online payroll services as it steps up fight with Square
✔️ Chase Payment Solutions Taps Gusto Embedded to Offer Embedded Payroll Services to Customers
✔️ Gusto reaches $500M in trailing revenue
Discover Considers Selling Its Student Lending Business
Discover (NYSE: DFS) is considering selling its student-loan business, according to Bloomberg. The business includes a $10.2 billion portfolio of private student loans, and is expected to attract interest from alternative asset managers or rival student-loan platforms, such as Navient (NASDAQ: NAVI) and SoFi (NASDAQ: SOFI). This potential sale could free up $2 billion to $3 billion in capital for Discover, but the company could choose to retain the business. In October, approximately 27 million borrowers will resume repaying their federal student loans after a three-year suspension. President Biden's attempt to forgive approximately $400 billion in student debt through executive action was overturned by the Supreme Court.
Last month, Discover announced the sudden departure of its CEO, Roger Hochschild, replacing him, on an interim basis, with the company’s board member, John Owen. The change followed the company's earlier decision to temporarily halt share buybacks while conducting an internal review concerning compliance, risk management, and corporate governance. In a July earnings call, Discover disclosed potential issues it was facing, including the possibility of an FDIC consent order related to consumer compliance problems. The company also admitted to overcharging merchants for an extended period, dating back to around mid-2007.
It has not been a good year so far for financials (as measured by the Financial Select Sector SPDR Fund performance, which underperformed both the S&P 500 and Nasdaq Composite indices). Aren't financial companies supposed to perform well in a rising interest rate environment?
@ JPMorgan Chase & Co
🇺🇸 San Francisco, CA, United States
Fintech Partnerships, Executive Director
@ JPMorgan Chase & Co
🇺🇸 San Francisco, CA or New York, NY, United States
Director, Business Strategy
@ Charles Schwab
🇺🇸 Jersey City, NJ, United States
Director, IT Product Management
@ Charles Schwab
🇺🇸 Westlake, TX, United States
Director, Generative AI
🇺🇸 Riverwoods, IL, United States
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Cover image source: Charles Schwab
Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.