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They must be reading the blog: I first mentioned this story several weeks ago, how Schwab is up-ending the investment industry. This is really quite amazing. Long, long article over at financial planing:
Vanguard has been sucking up assets but today, the $6 trillion company has a real threat — Charles Schwab. Schwab is poised to upend the industry with no fees, higher quality service and better products that could make traditional index funds and ETFs obsolete. Schwab has made three big announcements recently. The connection between the three may not be obvious, but together, they indicate what could be a brilliant strategy.It's a very, very long article; worth a read. I know I have been incredibly happy with Schwab; I've been with them for decades.
How do these add up to what I call a possible brilliant strategy? Understand that Schwab, the original discount broker, is no longer in the brokerage business. In fact, it appears the asset management business is merely a side business and a money loser at that: They are charging less than their costs. About 61% of Schwab revenue comes from net interest income with most of the rest coming from asset management fees according to Schwab’s most recent 10-Q.
- it eliminated commissions on stocks and ETF trades
- it agreed to buy TD Ameritrade in a $26 billion deal
- it said it would offer fractional shares in stocks
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Truly Ridiculous
With all that's going on in the world, the US FTC sues to block Schick from merging with Harry's.
Oh, give me a break.
I was once told that a merger often means that one company is in trouble (or, in some cases, both companies).
Years and years ago the US government also stopped the merger of two VHS video rental companies, national franchises, despite more than adequate competition. Both of those video rental companies are now out of business.
It will be interesting to see if the government lets the Schwab - TD Ameritrade "merger' proceed. I'm thinking this may not be a chip shot, or whatever the idiom is.
This is one where I actually cleave more left than you. Companies LOVE to collude to raise prices. What did Rockefeller say when he met all his most hated enemies? "Let us never forget our true enemy...the customer."
ReplyDeleteI've been around enough to see this in commodity industries, gas stations, etc. Fastest way to profits is pricing. And only way to raise prices above free competition levels is to collude and corner market share.
I certainly don't see that down here in Texas. Competition is keeping gasoline prices below $2.00. Right now, easy to find gasoline at $1.89/gallon. Never had it so good.
DeleteKeep it that way. Gasoline stations are notorious for jacking up prices when no competitor and dropping when one opens.
ReplyDeleteYes, I've talked about it on the blog, regarding our neighborhood service stations. Prices came way down when Murphy discount service station opened a new station just down the street.
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