September 25, 2008

In Crisis, Opportunity Abounds for RIAs

Schwab's Goldman makes the case for independent advice

Greeting the 1,400 advisors who gathered in Atlanta on day one of the annual Schwab Institutional Impact conference on September 24, SI's Charles Goldman argued that "as severe and unique as the crisis is, there's also great opportunity" for Schwab and its advisors during this troubling time in the markets. Noting that "our real competition are the wirehouses" whose "sales forces will be there long after this crisis is over," Goldman sought to rally the troops by reporting that in the first six months of 2008, "you brought more assets into Schwab alone than the wirehouses brought into their private client groups in total." He acknowledged that the markets' swoon had led many RIAs to be working harder while their revenue has taken a hit as their AUM numbers have shrunk during this time of "incredibly turbulent markets."

Speaking in a separate interview on September 25, Goldman discussed what its advisors looked to Schwab to provide during the crisis, and the assets that breakaway brokers are bringing to Schwab's custodial coffers. "Our role is to provide safety and soundness for clients' assets" at all times, he said, but those qualities are even more sought after in troubled times. In 2007, breakaway brokers--which Schwab refers to as ATIs, advisors turning independent--brought in $10 billion in net new assets, Goldman said, and that "this year we've beaten that already." While he admitted that "many brokers are not entrepreneurs," the "hundreds, not thousands, of brokers who fit" the fee-based, entrepreneurial model were exploring their options at Schwab and its competitors, and bringing serious assets with them.

While some exhibitors at the mammoth Impact conference grumbled about slow traffic at their booths in the Georgia World Congress Center, a Schwab spokesperson said there were 3,097 overall registered attendees, 1,409 advisors, and 385 Schwab employees. Last year, which was the 20th anniversary of the Schwab unit that serves as a custodian for 5,700 RIAs, there were 3,656 registered attendees, 1,974 advisors, and 525 Schwab employees.

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