Ameritrade, Charles Schwab, Schwab Ameritrade discussed on Squawk Pod
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Political critical pollster Frank Luntz on the highlights from Wednesday night's democratic debate and his bolt call for twenty twenty. Well let's be clear. There is no front runner and Washington and Silicon Valley. Allie meet again recode. Swisher is not impressed by the president's relationship with Apple CEO. Tim Cook Bromance. That's not trying to use that. When president trump called him Tim Apple? It shouldn't point it out. It's you know he's saying something awkward. I'm CNBC producer. Katie Kramer it's Thursday November Twenty First Twenty Nineteen Squawk pod begins right now. Spent thank if you buy one. Good morning everyone. Welcome to Squawk box here on. CNBC we are live from the Nasdaq market site. In Times Square becky quick along with Joe Kernan and Andrew. Ross sorkin first up today a story. Becky broke just minutes before squawk box went to air. At six o'clock this morning Charles Schwab the largest publicly traded discount broker is reportedly in talks to buy the second largest publicly traded discount broker. Td Ameritrade this is part of an ongoing disruption in the brokerage industry. Here's here's a refresher. When trading stocks retail investors basically individuals investing for themselves and not for an organization pay a commission or fee to the broker or Ebro Grinch who completes the trade on their behalf? Of course it's not as great a deal for the investors as companies that collect those fees and have consequently faced pressure to reduce them and reduce them. They have J. P. Morgan Chase unveiled a free trading APP in August and within two months all the other major brokerages had followed suit or at least announced plans to follow suit. Td Ameritrade and Charles Schwab among them. But here's the RUB. The commission's contribute to the revenue of the brokerages who collect them and eliminating that revenue stream has worried shareholders golders. At any rate. The industry is changing. Here's Becky with today's story. Charles Schwab Corporation and talks by. Td Ameritrade and a deal could be announced as early today that move if it happens would consolidate an industry. That's been going through massive disruption calls to Schwab and td Ameritrade have not been returned but obviously the entire complex flex seems to be moving on this joining us to talk more about this as Mike Santoli and Mike. What do you think obviously blockbuster Bosox being up tells you that the market believes CBS? This area is crowded too much capacity and there's great synergies in a deal for cutting costs. I think that the going zero commissions was a sign that the the competition for retail assets had gotten to that. Also it's not just in commissions right. I mean the whole industry is going to very low fee exchange traded funds these these these kind of software based advisory services where it's a very low fee to all that stuff has been constant pressure. And I do think that you had Ameritrade take the biggest hit it really. In total market cap from Zero Commission move much more leverage to the trading business. It's been an industry. That's gotten rolled up a lot over the past decades but this this would be a real step up in that activity because you had had a bit of a low. And it's interesting you mentioned e-trade being down on each raiders vacillated about potentially being a seller being in place. It's been considered a potential target and Schwab Ameritrade obviously would be to the obvious buyers potentially coming from one of the and in fact Ameritrade typically viewed as a acquirer In fact maybe that's why some of the valuation was a little bit depressed because they just did by Scott Trade and it's unclear if they were going to continue to be a buyer. Also one interesting thing about this. This is both companies still have kind of the founder families with ownership. This is the first generation of this industry. It's never been passed down really so it's it's sort of a fascinating Joe talked about that earlier. Just about how this industry came out of nowhere. And he's going to the market together. Yeah when this company exists it's going to be ninety billion dollar company for how long how long how long are we going to beat about. I know I know but I I just think that there's a lot of it's GonNa come out of this value of three children and assets of restaurants that you can glean some kind of whatever and that's that's the day better than some I mean they would do some serious rationalization yes and there's parts of this business. I think they're culturally very different. And do you think they've gone head to head in an aggressive way to be either back end operations service of registered investment advisers which is basically the fastest growing part until the questions I'd ask are do you think that. What kind of savings do you think can really ring out of combined company like this and then in terms of is is back in technology? I think it's a marketing dollars. The Marketing Donald is going to be a big money cost of account. Acquisition is one the leading costs and technologies probably the leading costs so put them together. Combining headquarters remember. I mean. Td Ameritrade right you had td. Bought Waterhouse Ameritrade thinker Swim. There were all it was really a fragment so people know the playbook in terms of putting these companies together rationalizing trying to retain all the customers and getting the kind of picking the best operations that you have among the two companies so I do think I don't know the magnitude I haven't seen the estimates but the market is telling telling you the efficient and you think this is a response to Fintech effectively. It's a response to yeah to the to the Robin Hood. Venture capital. Subsidized is businesses. That are now pressuring these other guys to consolidate I think that's the most recent catalyst but even the development of those Robin Hoods and the Fintech businesses says just reflect the fact that retail finance has become software I mean even if you look at at Merrill Lynch what they've been doing with their human an advisory is skewing NAM upscale. And make sure you know for all of David Salomons efforts at Goldman Sachs to try to get some sticky money in there which is what then Marcus businesses all about. Why doesn't it traditional play? I'm not I'm not suggesting that go by. TD AMERITRADE and jump into this situation. But you'd think that all of these players would therefore be up for grabs for some of the classic sort of old school not beyond the realm at all right There's a huge chunk of all of the integrated brokers like Mike Marrow. Where eight is basically merrill edge it would right they call it where they kind of shunt you into a automated on a call center type right and so you know it's not incompatible with something like you know I think for Goldman Nicotine? It looked. We had the infrastructure. We have all the all the exchange memberships we had the back end. We can do ourselves into a digital bank that raised more than one hundred million dollars from investors including movie Studio Star. A Leonardo DiCaprio has run into some trouble. This morning joins US right now. It seems he dot com bank report. Who something what? What's going on you so this is? This is the bank that tried to be the. I green socially conscious online digital bank. It's right for men but we can talk about that in a moment so it was created about five years ago and they have this business model where you pay what you want to you. And your deposits are going to be you know. fossil-fuel-free guaranteed all these things and they had some momentum apparently and what we heard. I essentially that they ran into trouble so this year. The funding situation is not quite the risk appetite from VCE investors. Not Quite what. It was a year ago and right and so now that their series Z. is basically up in the air and they fired fifteen percent of their staffers. They've stiff some vendors and these are all signs of financial distress to me personally green. You don't mean green. You mean woke.