Charles Schwab Corp (SCHW), TD Ameritrade Holding Corp. (AMTD): Rising Interest Rates Will Lift This Stock

While TD Ameritrade Holding Corp. (NYSE:AMTD) competes for Schwab’s brokerage clients, T. Rowe Price Group, Inc. (NASDAQ:TROW) competes for its asset management clients. T. Rowe Price is one of the largest asset managers in the United States, with $575 billion under management.

TROW’s asset management clients are stickier than Charles Schwab Corp (NYSE:SCHW)’s; the majority of its accounts are retirement accounts, which tend to stay with one manager for many decades. In addition, TROW has more high-performing mutual funds than Schwab.

However, TROW’s business is extremely concentrated in the U.S. and focuses on equities and balanced equities/bonds portfolios. Not only does it miss out on opportunities to cross-sell a variety of strategies to its clients, but it is overly exposed to U.S. equity markets.

Bottom Line

Relative to most industries, there is not what I would call fierce competition in the brokerage/asset management business right now. If you invest in Schwab, you shouldn’t do it because you think it has a better competitive position. The thesis to bet on is that interest rates will rise soon, which will boost Charles Schwab Corp (NYSE:SCHW)’s bottom line. Bernanke has started to jaw-bone about higher rates, so anything could happen between now and 2015.

The article Rising Interest Rates Will Lift This Stock originally appeared on Fool.com and is written by Ted Cooper.

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