The merger unveiled last week of online brokerages Charles Schwab and TD Ameritrade is expected to create a combined firm that serves more than 24 million client accounts, totaling more than $5 trillion in assets. The move comes on the heels of a pitched battle among online brokers.

For the moment, expect no changes. The deal still needs to face regulatory approval before it closes, which could take a year. Following that, Schwab said full integration of the two firms will take between 18 to 36 months.

TD Ameritrade is known for its broad investment selection, powerful trading platforms and other technical innovations, such as using artificial intelligence for customer support. Charles Schwab is a major player in the mutual fund and retirement market. Together, the combined firm aims to cover the breadth of consumer financial services, including banking, trading and long-term wealth management.

Analysts said the merger throws a lifeline to TD Ameritrade, as the online brokerage depended on trade commissions for profitability, while Schwab makes more from holding client accounts. Like other brokers, Schwab earns interest on uninvested client cash.

The combined firm will offer greater cost savings while being able to expand offerings to a broader client base. According to the company’s release, the acquisition could cut costs of as much as $2 billion, some of which Schwab could pass on to consumers.

The recent trend of eliminating commissions led to speculation that a wave of consolidations may hit the industry, and the merger of TD Ameritrade and Charles Schwab is the first. Others may follow: For example, there has been talk for years that E-Trade may be in line for a merger.

Once the Schwab-TD Ameritrade deal goes through, competitors are likely to struggle to cut expenses and gain market share to compete with the behemoth that will be created by the merger. Analysts said the brokerage industry could move to add more banking and wealth management services as a key differentiator to gain additional clients and revenue. Interactive Brokers recently filed paperwork with plans to launch its own industrial bank, based in Utah.

In the meantime, brokers are likely to continue to reduce fees for trading and investment management. But one potential downside of continued consolidations: Fewer choices for consumers and the potential loss of a competitive landscape that led to this “race to zero” in the first place.


Kevin Voigt is a writer at NerdWallet. E-mail: