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What Should I Do With My USAA Investment Accounts? Thumbnail

What Should I Do With My USAA Investment Accounts?

Who is USAA?

Founded in 1922, USAA serves military members and their families. They provide insurance, banking, investments and retirement products to more than 13 million members. 


Who is Charles Schwab?

Founded in 1973, Charles Schwab is a financial services company focused on investment management. 


Is Schwab buying USAA?

No. USAA sold their investment businesses so they could focus on their insurance and banking businesses.

Schwab acquired USAA wealth management services, brokerage accounts and investment management solutions.

Victory Capital acquired USAA Mutual Funds, USAA 529 College Savings Plan and USAA ETF businesses.


Why is Schwab acquiring USAA Investment accounts?

Schwab will be able to earn more money, cut expenses, and grow its referral sources.

Schwab anticipates earning $130 million more each year by paying USAA investors less on their cash holdings.

About 12 million USAA members don't have investments with USAA. Schwab will gain a referral source through this acquisition.

Details on the transaction may be found here.


What will happen to my investments at USAA?

You are still the owner of those accounts. They will just be serviced by Schwab. You may establish a login at Schwab's website.


How will this affect me?

I don't have investments with USAA

Expect a lot of phone calls. USAA has 13 million members. Only about 10 percent of those member have investments with USAA. Which means about 12 million members don't. Expect there to be heavy cross-selling of products to those members who don't have investment accounts. Schwab bought a client list here and will be utilizing it to realize synergies in the deal.

I have investments with USAA

Expect to earn less. $7 billion in USAA brokerage accounts are sitting in high-yielding money market funds. Schwab will move these funds over to its bank. Schwab's bank deposit pays significantly less. When the deal was announced, Schwab estimated it will generate approximately $130 million in additional revenue primarily by paying investors less on their cash holdings. 13% of USAA investment assets were held in cash balances. Schwab is expecting most members to not take the initiative to search for higher yielding money markets.


What should I do with my USAA investment accounts?

There are benefits to having the accounts held at Charles Schwab. Schwab has more scale than USAA and can offer more services at a lower cost.

It doesn't matter much where the assets are held. The important thing is to take charge of your investment planning. If USAA membership holds 13% of their accounts in cash, that signifies that they aren't being actively managed. If Schwab is counting on members not to seek better yielding alternatives that speaks volumes to the power of inertia. Unless there is a pressing pain point, all investors tend to respond with inaction.

Use this transition as an opportunity to review whether you want to manage investments yourself or outsource investment management to a financial planning professional.

If you choose to manage them yourself be proactive and look at your investment objectives. Take the time to get your financial house in order before starting to invest.


I still have questions. Can you help?

We offer a 30-minute meet and greet call. No cost. No obligation. If you meet the criteria of clients we serve best then feel free to schedule a call.


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