M&A

Charles Schwab Buys USAA Investment Management Assets for $1.8B

Schwab will gain over one million new accounts and approximately $90B in client assets.
Charles Schwab Buys USAA Investment Management Assets for $1.8B

Charles Schwab agreed to acquire the assets of USAA’s Investment Management Company for $1.8 billion in cash. This includes the brokerage and managed portfolio accounts.

For Schwab, the deal adds over one million new accounts and approximately $90B in client assets.

The companies have also agreed to enter into a long-term referral agreement, which goes into effect at the closing that makes Schwab the exclusive wealth management and brokerage provider for USAA members.

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The company said it plans to offer roles to a significant number of USAA employees.

This announcement comes the same week as Schwab let go two top executives, began a restructuring plan, and canceled its Chairman’s Club program, an old-fashioned broker sales contest involving trips to Hawaii.

USAA provides insurance, banking, investments, retirement products, and advice to more than 13 million current former members of the U.S. military and their families. USAA is known for its legendary commitment to its members.

“We are honored to be entrusted with serving the financial needs of USAA’s members,” said Walt Bettinger, Schwab’s president and CEO. “We have long admired USAA’s mission to enhance the financial security of our country’s military service men and women and their families.”

USAA CEO Stuart Parker said, “Our mission is to facilitate the financial security of the military community through highly competitive products. This agreement with Schwab can help enhance our members’ financial futures with a client-first approach that offers access to more choices in investment products.”

“We are committed to making this a seamless transition for members and providing opportunities for employees,” Parker added. “USAA remains focused on providing award-winning service and advice on products and services across property and casualty, banking, and life insurance.”

In related action on Tuesday, Schwab cut loose two executives amid a massive “organizational restructuring.” The executives let go were Terri Kallsen, the investor services executive vice president, and Andy Gill, chief marketing officer.

Schwab senior executive vice president Jonathan Craig will assume the duties of both executives while a new organization structure is determined.

The cuts included Schwab ending its popular annual Hawaii trip that that was a reward for its 200 top-performing staff members.

Instead of the Hawaiian trips that the company said were rooted in “a different era” and currently poses “significant reputational risks,” Schwab said its executives will receive an individual travel award and paid time-off.

The transaction between Schwab and USAA has been approved by the boards of directors of both companies and is expected to close during 2020, subject to customary regulatory approvals and conditions.

The conversion of USAA’s brokerage services and managed portfolio accounts to Schwab’s platform will occur at the close of the transaction.

On Friday afternoon, Schwab stock was trading at $43.91 down .18 cents or 0.4%. The stock opened at $44.08, with a high of $44.24 and a low of $43.71.