As Charles Schwab (SCHW Quick QuoteSCHW - Free Report) continues with the integration of TD Ameritrade into its business following its acquisition in October 2020, the brokerage firm is experiencing a decline in net new asset flows primarily because of the attrition of TDA retail and advisory clients.

While releasing its monthly metrics data for July 2023, SCHW’s chief financial officer, Peter Crawford, stated, “As we continue to progress through the Ameritrade client conversion, we are observing initial evidence of the deal-related attrition we allowed for within the transaction math outlined at the announcement back in November 2019. These temporarily lower net flows reflect our organic asset gathering being offset by expected attrition within certain client cohorts, including recently converted Ameritrade retail clients as well as a modest number of Ameritrade advisor clients ahead of their planned transition to the Schwab platform in September.”

He added, “We believe that the ultimate attrition will be in-line with or slightly better than our initial estimates – approximately 4% of Ameritrade revenue prior to the deal or around 1% of combined total client assets as of December 31, 2022.”

Also, SCHW has said that it is exiting some of Ameritrade’s “atypical custodial relationships” that are inconsistent with the company’s approach to serving Registered Investment Advisors.

Despite this, SCHW’s monthly metrics data for July reflect healthy client engagement and momentum.

In July, SCHW reported core net new assets of $13.7 billion, reflecting a decline of 59% from the previous month and 57% from the prior-year month.

Nevertheless, its total client assets were $8.24 trillion, up 3% from June 2023 and 13% from July 2022. Client assets receiving ongoing advisory services were $4.18 trillion, rising 3% from the prior month and 12% year over year.

Schwab’s average interest-earning assets of $466.7 billion in the reported month declined 3% from June 2023 and 23% year over year. Average margin balances were $63 billion, up 2% from the previous month but down 13% on a year-over-year basis. Average bank deposit account balances totaled $102.6 billion, down marginally from the previous month and 34% from July 2022.

The company opened 303,000 new brokerage accounts in July 2023, declining 4% sequentially but rising 9% from the year-earlier month.

Schwab’s active brokerage accounts totaled 34.4 million at the end of July 2023, which remained relatively stable on a sequential basis and rose 1% from the year-ago month. Clients’ banking accounts were 1.79 million, up 1% sequentially and 7% from July 2022. The number of corporate retirement plan participants was up 1% from the prior-month level and 8% year over year to 2.46 million.

Over the past six months, shares of Schwab have declined 24.1% compared with an 11.7% fall of the industry.

Image Source: Zacks Investment Research

Currently, SCHW carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

Let’s look at how other brokerage firms like Interactive Brokers Group (IBKR Quick QuoteIBKR - Free Report) and LPL Financial Holdings Inc. (LPLA Quick QuoteLPLA - Free Report) have performed in July 2023.

Interactive Brokers released the Electronic Brokerage segment’s performance metrics for July 2023. The segment deals with the clearance and settlement of trades for individual and institutional clients globally. It reported a rise in client Daily Average Revenue Trades (DARTs) on a sequential and year-over-year basis.

IBKR’s total client DARTs for the month were 1,991,000, which grew 2% from the June 2023 level and 9% year over year.

LPL Financial is likely to come out with its monthly activity report in the coming days.

Currently, IBKR and LPLA carry a Zacks Rank #3.