• Charles Schwab's proposed TD Ameritrade acquisition, announced just before Thanksgiving but set in motion months ago, is the largest US securities brokerage deal ever.
• Joe Martinetto, Charles Schwab's chief operating officer, will be key in leading the firms' integration.
• Former colleagues describe Martinetto, who was chief financial officer for a decade of his 22-year run at Schwab, as a fair, methodical person who "protected" the firm's balance sheet during the financial crisis.
• The merger is expected to eliminate jobs, shutter branches, and take up to three years to complete.
• Visit BI Prime for more wealth management stories.

A $26 billion mega-deal for Charles Schwab to buy TD Ameritrade has already rocked the discount brokerage industry.

Now that the firms have agreed on the transaction, the hard part will be turning the vision of a combined firm into reality.

Schwab's chief operating officer, Joe Martinetto, will play a critical role meshing the two firms' sprawling information technology systems, teams, brands, and offices.

In buying TD Ameritrade, Schwab is making a bid for gaining sheer size after the biggest online brokerages raced to cut commissions to zero this fall. Execs have already called out cutting overlapping jobs and real estate as a way to save costs in the proposed deal.

Deemed a "well-traveled Schwabbie" on a business update call in 2007 by investor relations head Richard Fowler and often called "Professor Martinetto" on calls with analysts, he'll be assisted by a team of people from Schwab and TD Ameritrade for an integration projected to take up to three years.

Schwab is going to have to be extremely transparent in how they're handling these accounts and relationships.

The deal, expected to close during the second half of 2020, was set in motion before the brokerages and their competitors axed online trading commissions in early October.

Analysts have already peppered execs with questions including how much "re-papering" RIAs will have to go through with their own clients, and what customer attrition is to be expected.

Some 15,500 registered investment advisers combined park client assets with the firms.

To learn more about what Martinetto is taking on and how he might approach it, Business Insider spoke with past colleagues as well as post-merger integration experts.

The gameplan

Schwab's projected timeline is short compared with its typical pace of meshing new acquisitions, noted Jennifer Butler, the director of asset management and brokerage research at Corporate Insight.

"Schwab is going to have to be extremely transparent in how they're handling these accounts and relationships," which could include constantly communicating with clients about their accounts' transitions, she said in an interview.

Schwab integrated optionsXpress, a derivatives trading firm Schwab bought in 2011, in six years; it integrated Cybercorp, an online trading company Schwab announced it would buy weeks before stocks peaked in early 2000, in seven years.

Butler noted that this time around, Schwab is also going to contend with the Scottrade and thinkorswim technologies and systems that come along with combining its firm with TD Ameritrade.

Schwab has now begun assembling its integration team with at least one other exec.

In early December it said Tom Bradley, a former TD Ameritrade executive who left that firm in 2017 after three decades, would join Schwab in January as a senior vice president in adviser services.

Bradley will report to the head of Schwab Advisor Services, Bernie Clark, and play a "leadership role" in helping integrate the firms' adviser services businesses after the transaction closes, the firm said.

'He's seen a lot'

Martinetto is the third-highest earner at the company based on 2018 total compensation, after chief executive Walt Bettinger and chairman Charles Schwab. He earned $5,314,210 last year, according to a March proxy filing, between his salary of $687,500, plus $3 million in stock and option awards, and other compensation.

Some former colleagues we spoke with describe Martinetto, who was Schwab's CFO for a decade of his 22-year tenure at the firm, as a methodical, reasonable person who shielded the firm's balance sheet during the 2007-2009 financial crisis. Schwab declined to make Martinetto available for an interview for this article.

"It wasn't always 'the Joe way,'" said Elena Gomez, the chief financial officer of software company Zendesk and a former vice president at Schwab who worked with Martinetto during his time as finance chief.

"He was unafraid to make the unpopular opinion in the room," she told Business Insider in an interview. "He led through collaboration, not intimidation. That's a really important aspect of his leadership style."

It wasn't always 'the Joe way.'

Gomez, who worked at Schwab for 11 years in several finance roles, described him as "pragmatic."

Years before the firm in 2014 began expanding its Denver-area presence, talks were underway about the process, and Gomez said Martinetto was thoughtful in approaching some migration out of San Francisco. He's also been at the firm as it moved into providing more financial advice in addition to just discount brokerage services.

"From transforming back in the day when we were focused on trade volume, to advice, to where they are today, he's seen a lot," Gomez said. "So bringing TD into the fold is another thing on his list. He's so well-positioned."

Schwab and TD Ameritrade have said their new corporate headquarters will over time relocate to Schwab's newly built campus in Westlake, Texas, around the Dallas-Fort Worth area, where both firms have a presence; TD Ameritrade is headquartered in Omaha. Schwab expects to continue hiring in San Francisco.

Schwab meanwhile is also set to close on its $1.8 billion acquisition of USAA's investment management assets next year, giving it another way to bulk up its wealth management business.

Fred Duden, the global head of product development at Broadridge Financial, told Business Insider that he counted Martinetto as a mentor when they were colleagues at Schwab, and that they worked alongside each other on several transactions.

"We worked on some difficult things together," said Duden, who left Schwab in 2015 after 11 years there. At Schwab, he and Martinetto worked together in selling off US Trust to Bank of America in 2007 for $3.3 billion.

"He would be direct and kind and supportive," Duden said. "He could get results from a team."

A conservative approach

Around the time Martinetto was named Schwab's chief financial officer in 2007, he was seen internally as an early staunch supporter of Bettinger before he rose to chief executive, according to a former Schwab employee who worked closely with Martinetto's organization during that time.

"The story on Joe in those days was, Walt kind of came out of nowhere to be the heir apparent to Chuck [Schwab]. Martinetto was always a big supporter of Walt, in getting Chuck's confidence," said the former employee, who requested anonymity to speak freely.

Martinetto was seen as someone who bet on Bettinger's abilities early on, the former employee said, and often supported his views.

"Thirty-six months sounds conservative, and that plays into who he is, and who the firm is, taking a methodical approach," the former employee said of the expected integration timeline, adding that Martinetto had "protected" his balance sheet from risky securities in which other firms were investing, like collateralized debt obligations.

The role of the integration team is critical in mergers, particularly of this scale, said Emilie Feldman, an associate professor of management at the University of Pennsylvania's Wharton School. A breakdown in the process of meshing back-end technology could have "catastrophic consequences," Feldman said in an interview.

"Even if it's seamless, if customers are not happy about the brand, then that's a huge risk," said Feldman, who studies the role that divestitures, spinoffs, and mergers and acquisitions play in corporate reconfiguration.

The risk is particularly acute for a space that's become "very commoditized," like online stock-trading and wealth management services.

Three years ago, Martinetto addressed a group of students who attended his Southern California alma mater, Claremont McKenna College.

Martinetto, a native of nearby Alhambra, told the students in front of him that he went back to school to get his MBA at the University of California, Berkeley, taking "pretty much every finance and accounting class I could take in two years."

"Accounting so that nobody could ever pull the wool over my eyes in terms of how something was recorded, or booked or described in an accounting statement; finance because it was a really interesting meshing of the things that I enjoyed of economics and mathematics," Martinetto said at the time.

He described cutting his teeth early on at First Interstate Bancorp, a struggling regional bank that Wells Fargo bought in early 1996, the year before Martinetto left for Schwab.

The $11.6 billion deal was a "bitter four-month hostile takeover battle," the New York Times reported, and was then the most ever paid for a US bank.

"Acquisitions are messy enough, hostile acquisitions are even messier," he told the Claremont McKenna group, detailing how lucky he was, in hindsight, to have been given so much responsibility so early in his career at a firm in the throes of change.