The announcement last week by E*TRADE (ETFC) of its acquisition of Trust Company of America is being positively received by the advisers who will become part of the discount broker.
According to WealthManagement.com, which surveyed some of the RIAs to get their take on the $275 million acquisition that has some Wall Street analysts scratching their heads. TCA has more than 180 active licensed independent advisors, many of whom are unconcerned about competition from E*TRADE’s inexpensive brokerage arm. The business manages $17 billion in institutional assets.
While every agreement causes some apprehension among RIAs, many are convinced that under E*TRADE, they will gain access to greater resources and technology that will improve the function of advisers as well as the service they provide to customers. Furthermore, they claim that the agreement would allow them to be more creative and create new solutions to assist customers meet all of their financial concerns. It will also assist in keeping prices down. Some advisers feel the merger will offer them with fresh leads with more complicated demands via E*Trade’s bargain brokerage, according to the RIAs.
While RIAs affected by the agreement seem to be pleased, not everyone on Wall Street is. When E*TRADE announced the purchase with third-quarter financial results, it said that the company’s goal was to diversify its business. However, experts are concerned about a lack of synergies and a deviation from the company’s position to develop organically. Furthermore, some are concerned that the transaction may jeopardize the board’s efforts to identify a buyer for the firm.
E*TRADE Chief Executive Karl Roessner said on the company’s third-quarter earnings conference call that while E*TRADE strives to be the number-one digital broker and adviser to self-directed traders and investors, it only has between 10% and 12% of customers’ investable wealth. As a result, it has been searching for the best way to improve that, which led to the acquisition of TCA. He also said the deal shouldn’t hurt any of the board’s activities. That sentiment was echoed by a handful of analysts including Steve Chubak at Instinet who said in a recent research note that the deal gives E*TRADE a foothold into the RIA market and at the same time won’t impede the board’s ability to pursue alternatives if necessary.
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