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Discount Brokerage Weekly Roundup – October 19, 2020

Despite the stock market being a voting machine on what the future is expected to look like, the videos of people making lightsabers and satellite internet deploying also provide reassurance that despite the pandemic, people are still hard at “work” making interesting things happen in the world (and outside of it). Online brokerages are also still keeping busy building and planning for the future, too. As big deals move through their paces, the world of DIY investing that they’re preparing for seems far away now but should be coming into reality by the 2024 US presidential election.

Big Deals Keep on Turning: Schwab Locks in TD Ameritrade Acquisition

While eyes are on America for the next few weeks because of the election, that doesn’t mean that there aren’t some interesting developments taking shape in the DIY investing space.

While the US Congress is awaiting a big deal on stimulus (at the time of publication), in the background there are two big deals that are now done and dusted in the US online brokerage space that will have some interesting consequences for online investors on both sides of the border.

Starting first with the acquisition of TD Ameritrade by rival Charles Schwab.

Eleven months and $22 billion (US) later, the “kind of a big deal” deal is officially done. The result is a gargantuan online broker in the US with about $6 trillion in client assets, 28 million online brokerage accounts, and more than 5 million daily trades. Fun fact: When Schwab first started, they were processing 50 trades per day.

This massive deal raises the stakes for “Schwabitrade” to get right the things that have made TD Ameritrade and Schwab clients as loyal and as vocal as they have been prior to this merger. The integration of the two brands will take an estimated 18 to 36 months, and for the time being, the two firms are going to be operating as separate companies.

Already, though, there are important changes to the executive team at Ameritrade that signal it won’t be “business as usual” for the next few years. Earlier this month several important TD Ameritrade executives were let go, indicating that there might be important changes coming to the client experience. One of the notable departures was that of the executive vice president of trading and education.

Mergers/acquisitions are an interesting proposition, since it essentially means taking what is hopefully the best parts of two platforms/experiences and creating an even better one in the end. At this stage, however, with such a long road ahead, there are many skeptical voices internally and among online investors who question the performance of some of the Ameritrade flagship tools (like Thinkorswim) post-merger.

For competitors in the space, the uncertainty offers an opportunity to win over unhappy clients. There is no shortage of competition among brokerages in the US, and as a result, Schwab must do a very good job of transitioning Ameritrade clients into a new experience and continue to innovate in a way that appeals to customers. E*Trade, Robinhood, Interactive Brokers, Fidelity, and others are all capable of benefitting from any missteps during the Ameritrade/Schwab deal, and it’s a fair bet that they will be actively advertising while Schwab is busy sorting out its next steps.

Of course, Schwab/Ameritrade isn’t the only big merger taking place in the online brokerage space. E*Trade is being acquired by Morgan Stanley, and for Canadian online investors, this could represent an interesting opportunity for another online brokerage competitor in the Canadian space.

Earlier this year (after the acquisition of E*Trade), Morgan Stanley announced the launch of a wealth management arm in Canada that specifically cited providing “a discounted self-directed investing solution” as part of their service offering. While it is unclear exactly what that might mean in terms of the platform/service that will provide the self-directed experience, the reality is that 2021 looks to be a year in which more than one US online brokerage may set up shop in Canada.

The other big Canadian consequence of the TD Ameritrade/Schwab merger is that TD Bank, parent to TD Direct Investing, is set to gain a 13.5% stake in Schwab because of the 43% stake that TD owned in Ameritrade. The approximate value of TD’s position in Schwab is worth just over $12 billion. Not a bad payday to avoid having to battle out what is increasingly a tougher fight in the online brokerage space in the US. Case in point: Robinhood’s valuation just reached almost $12 billion (US), with no signs of slowing down.

Investor Education Month – Update

This past week featured a solid lineup of educational content for Investor Education Month, to help individuals learn more about the nitty-gritty of managing wealth and investing. Of course, it being COVID times, all of this content was delivered via webinar, and as a result, attending these sessions was something you could do conveniently from the comfort of home.

Up first was a session prepared and delivered for Investor Education Month by TD Direct Investing. Specifically, TD Direct Investing arranged a webinar featuring YouTube finance and investing personality Brandon Beavis. Owner of the Brandon Beavis Investing channel and Investing for Beginners online investor education course, Beavis discussed the topic of how to become a more resilient investor.

There were a number of topics covered as part of this webinar, ranging from understanding the basics of the stock market, to opportunities to invest in during the pandemic, to some tips on how to go about buying and selling stocks.

In terms of staying “resilient,” the major tip Beavis offered to viewers was to come back to the basic principle of proper asset allocation.

This webinar was interesting in that both the guest speaker and the topics were geared specifically to younger and less-experienced investors.

For a new generation of investors, there are now lots of different places on the internet to turn to for information about online investing. However, YouTube is clearly a favourite when it comes to trying to learn just about anything. For younger/millennial investors, YouTube has a wealth of information on everything from cannabis to crypto to couch potato investing. Where Beavis stands out is not so much in the “get rich quick” content but more in the long-term balanced-investment approach.

The audience-size and viewership metrics speak for themselves for YouTube content creators like Beavis. There is clearly a value-add to having a younger, relatable voice explaining how things work in the stock market. Interestingly, this webinar seemed to emphasize a more “passive” investing approach that is more aligned with the “digital advice” of less-frequent investing, as compared to the online brokerages, which are incentivized toward a more active investor audience.

Overall, this was a great event to hear a broad conversation about the world of investing and personal finance. Specifically, it was effective for beginners who are curious about investing and want to get familiar with some of the terms and concepts of managing wealth.

In addition to the free webinar hosted by TD Direct Investing, there was also this past week an in-depth three-day personal finance series called the Canadian Financial Summit. Access to the event was free, but viewing the content more than 48 hours after the session required purchasing an all-access pass.

This series of webinars featured some of the most well-known names in Canadian personal finance, such as Rob Carrick, Ellen Roseman, and Peter Hodson, as well as many independent content creators and personal finance bloggers.

Among the topics most relevant to DIY investors that were featured in this summit:

  • TFSA Creator Shares Best Practices for Optimizing Your Financial Literacy
  • How to Pick the Right Stocks in 2020-2021
  • What DIY Passive Investing Style Is Optimum for You?
  • Why I Became a DIY Investor and How You Can Too
  • How to Crisis-Proof Your Finances
  • How to Easily Outperform Investment Advisors and Robo-Advisors
  • How To Automate Your DIY Investing Without Paying the Massive Fees
  • The High Risk of Bonds: Are Bonds Actually Safe Investments?
  • The Top Mistakes Canadians Make in Their Investment Portfolios
  • How to Build a Portfolio That Is COVID-Proof

There were lots of fascinating conversations about the fundamentals of investing as well as references to how to navigate some of the challenging financial realities presented by the current COVID-19 crisis. Interestingly, although not formally positioned as part of Investor Education Month, there was an abundance of material that was of value for DIY investors to have tuned in to. While the content is available for viewing after the conference, it does come at the steep price tag of $197.

From the Forums

No More Pencils, No More Books

A recent grad with no debt wants to set up an investment portfolio but feels lost and overwhelmed trying to study all the available information. Fellow Redditors weigh in with their advice in this post.

Lost That Loving Fee-ling

Can having more than one online brokerage lead to better outcomes? One DIY investor is starting to think about splitting assets among different brokerages rather than housing them all in one place and asks members of the Financial Wisdom Forum in this post for some perspective on whether having more providers leads to better returns.

Discount Brokerage Tweets of the Week

Into the Close

If the markets continue to move the way Donald Trump does, well, we’re not quite sure what direction they’ll be going next. This week will have a number of big earnings announcements, so all kidding aside, it’s likely to feature its fair share of volatility. Whatever screens you happen to be glued to this week, here’s hoping you find some time for something to smile at.

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