USAA announced Thursday it has sold the company’s investment management division, which includes brokerage and managed portfolio accounts, to the Charles Schwab Corp. for $1.8 billion in cash.
Approved by the boards of both companies, the long-term referral agreement means Schwab will become the exclusive wealth management and brokerage provider for USAA members.
More than 1,000 USAA employees will be affected by the transaction, which is expected to close in 2020, subject to regulatory approvals. About two-thirds of them could be considered for positions elsewhere.
The deal adds to Schwab’s $1.9 trillion investor services business through the addition of over 1 million new accounts and approximately $90 billion in client assets, according to Schwab.
The announcement comes just one week after talks between the two companies were revealed by the Wall Street Journal and during the same month USAA closed on a deal with Victory Capital, which acquired USAA’s mutual fund and exchange-traded fund business July 1.
A USAA spokesman said Schwab plans to offer jobs to at least 400 USAA employees who will be affected by the deal. More than 400 others will be considered for jobs in the USAA Life Insurance Co.
But another 350 employees, he added, “could eventually leave USAA.”
“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,” stated Stuart Parker, CEO of USAA.
“We are committed to making this a seamless transition for members and providing opportunities for employees,” Parker stated. “USAA remains focused on providing award-winning member service and advice on products and services across [property and casualty insurance], banking, and life insurance.”
On July 1, the global investment management firm Victory Capital acquired USAA’s mutual fund and exchange-traded fund businesses as well as the USAA 529 College Savings Plan in a deal worth $850 million first announced in November.
USAA previously stated that Victory Capital and its operational business providers hired 230 USAA employees, and others affected by the deal are now employed within other divisions at USAA. About 60 were laid off or separated from the company.
Victory Capital plans to relocate the firm’s global investment management business from Ohio to San Antonio this year and announced this month it will move into office space at WestRidge at La Cantera, 15935 La Cantera Parkway.
USAA sells auto, home, and life insurance in addition to offering banking, financial advice, retirement products, and investment services to military members, veterans, and their families. USAA has more than 12.8 million members and 32,000 employees, according to its website.
The financial services company has dealt with a number of compliance issues this year. In January, the Consumer Financial Protection Bureau charged USAA with violating banking and consumer protection laws. The following month, the Office of the Comptroller of the Currency filed a consent order stating USAA has failed to implement and maintain a risk management program suitable for its size, complexity, and risk profile.
A USAA response to Thursday’s announcement on the company’s Facebook page stated: “Today’s environment is changing the way we deliver on our mission. … Fierce competition, regulatory demands, industry consolidation and increasing consumer expectations for low-to-no fee products means the right path forward is to form strategic relationships with trusted investment companies to best serve members.”
The Charles Schwab Corp. provides brokerage, banking, and financial advisory services through its operating subsidiaries: the Charles Schwab & Co. Inc., which offers investment services and products, including Schwab brokerage accounts, and a banking subsidiary.
Schwab operates 365 offices and manages 12 million active brokerage accounts. The company serves 1.7 million corporate retirement plan participants, services 1.3 million banking accounts, and oversees $3.7 trillion in client assets.
“We have long admired USAA’s mission to enhance the financial security of our country’s military servicemen and women and their families,” stated Walt Bettinger, president and CEO of Schwab. “Both of our companies share a commitment to integrity and service, and both have strong track records of achievement for those we serve, which is why we believe this relationship makes so much sense for everyone involved.”