Weekly Links: The Marriage of Two Custodians

Happy belated Thanksgiving everyone!

One of the biggest pieces of financial news this week was the announcement Charles Schwab will be acquiring TD Ameritrade (see below). Some readers may expect further consolidation, particularly since the firm moved to $0 commissions. In addition, on the heels of their acquisition news, Schwab announced it would be moving its headquarters from SF to Texas. With this acquisition Charles Schwab will hope to realize synergies (read: layoffs) and boost their share of the retail investment advice market.

Without further ado, here are my topic articles and podcasts for the week.

Articles

Investment Advisers Fear Losing Out in Schwab-TD Ameritrade Deal

In case you haven’t heard, Charles Schwab has announced its intention to purchase rival TD Ameritrade. The deal is currently valued at $26 billion. As the WSJ states, RIAs rely on brokerages including Schwab, TD Ameritrade and Fidelity Investments to execute trades, hold clients’ assets and perform related services such as record-keeping. And once the deal closes, the new firm will act as custodian for roughly 51% of the market’s assets.

Navigating life’s big, non-reversible decisions

This week, Tadas Viskanta wrote about the importance of financial advisors. Tadas discusses the increasing need for advisors to help clients with non-reversible life decisions, particularly as the original value proposition (investment management) becomes commoditized. For the average investor, this problem has largely been solved, as Tadas quotes Dave Nadig. Nonetheless, advisors still play a crucial role. We all face financial decisions that will significantly impact our lives; problems that aren’t solely a function of our finances. These problems often pose questions that require more art than science, and that’s where advisors can help.

OK Boomer, Who’s Going to Buy Your 21 Million Homes?

In the coming decades, we’ll be faced with one of the largest wealth transfers our country has ever seen. Roughly 10,000 Boomers enter retirement every day, and by 2030, the youngest Boomer will turn 66. This aging population will put a strain on many parts of our society, from our health care system to our labor force. Another such issue, as Laura Kusisto discusses, is the impact this will have on our real estate market and economy. With the potential for 21 million homes to hit the market over the next two decades, Laura discusses implications this has for certain parts of the country.

Beware Footnote Mischief

As any accountant worth their salt knows, companies have been manipulating their earnings for years. With increasing frequency, companies report non-GAAP financials in their management’s discussion and analysis section alongside the financials dictated by US GAAP. Companies argue these financials provide additional insight into their business and help investors understand the true financial health of the company. Professors Charles Wang of Harvard Business School, and Eric So and Ethan Rouen of MIT’s Sloan School of Management set out to quantify the effect of these departures for the first time.

Silicon Valley Adjusts to New Reality as $100 Billion Evaporates

2019 has been the year of “unicorns” gone public. Since the dotcom burst, startup firms have increasingly chosen to stay private. Able to seek funding on the private market, many of these firms haven’t seen the need for an IPO. In fact, 419 companies have reached the coveted $1 billion valuation (the so called “unicorn” level). However, from the growing demand from employees (whose bulk of compensation comes from restricted stock) to IPO and free-up shares, to the potential for easy liquidity, more companies have decided to make the leap. But, once public, these companies are finding their value to be as illusory as their namesake. As Heather Somerville writes, once the darlings of Silicon Valley, these companies have collectively lost about $100 billion in value this year.

Podcasts

Living with Money - Episode 96 - Bill Sweet

Readers of my first weekly links post know I’m a big Ritholtz Wealth Management fan, and CFO Bill Sweet is no exception. Before joining Ritholtz Wealth, Bill worked at a small family tax practice and as a Captain in the United State Army. Outside of his career, Bill discusses taxes, investment allocation, and key points to know when you start your investing career.

The Biggest Thing the F.I.R.E. Movement Gets Wrong

In this installment of the Money Guy Show, hosts Brian Preston and Bo Hanson discuss some of the downsides of the FIRE (Financial Independence, Retire Early) movement. For the FIRE movement, conventional investment wisdom goes out the window. For example, the typical 4% safe withdrawal rate is predicated on the investor retiring in their 60s and having a 25-30 investment horizon. But what’s a safe withdrawal rate for “retiree” with a 40-50-year investment horizon? In addition, Brian and Bo discuss the concept of Sequence of Return and how this may affect FIRE movement participants.

LinkedIn Speaker Series with Charles Schwab

The LinkedIn Speaker Series brings in innovative thinkers and entrepreneurs from around the world with the hope of inspiring employees and listeners. Previous guests include: Eric Schmidt, Reid Hoffman, Mario Batali, and Jack Welch. In this episode LinkedIn CFO Steve Sordello sits down with Charles Schwab to discuss the rise of The Charles Schwab Corporation, personal challenges Charles faced, how he overcame them, and how Charles has shaped the industry. With Charles timely release of his memoir, Invested, and the recent announcement of The Charles Schwab Corporation’s acquisition of TD Ameritrade, this episode is proving a must listen.

Talk Your Books: Value & Momentum with Jack & Wes

In the latest Talk Your Books episode, Ritholtz Wealth’s Ben Carlson and Michael Batnick sit down with Wes Grey and Jack Vogel of Alpha Architect to discuss value and momentum strategies and how these two develop their investing process. Wes and Jack founded Alpha Architect as a research-intensive asset management firm. After serving as a Captain in the United State Marine Corps, Wes went on to earn and MBA and PhD in Finance from the University of Chicago, studying under Eugene Fama. Having graduated summa cum laude with a BS in Mathematics and Education from The University of Scranton, Jack went on to earn a PhD in Finance and an MS in Mathematics from Drexel University. In other words, these guys know their stuff.