Schwab's Buy of 'Crown Jewels' Escalates Battle With Wall Street Biggies

The longest bull market in history has created a growing class of U.S. investors flush enough to upgrade their computers, their kitchens and their cars. And many of those investors, who got rich trading with the likes of discount giant Schwab (SCH Quote), have chosen to upgrade to full-service brokers, too.

But that's all about to change, if Schwab's proposed $2.7 billion acquisition of bank-for-the-wealthy U.S. Trust (UTC Quote) works as planned. The deal is richly priced but worth it, in Schwab's view, because it will help to combat one of the San Francisco brokerage's main problems in recent years: Holding on to the increasingly lucrative -- and competitive -- business from customers whose accounts grow fat on stock-market appreciation.

The deal also renews Wall Street's focus on the tug-of-war for investors' hearts and assets that Schwab is waging with integrated brokerages such as Merrill Lynch (MER Quote) and Morgan Stanley Dean Witter (MWD Quote), which have benefited from clients' growing wealth and the full-service firms' broader offerings.

Exodus

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