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Schwab Crosses $500 Billion; Will Finance Breakaway Brokers

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Charles Schwab & Co. announced that its affiliated advisors now custody more than $500 billion at Schwab Institutional, up 23% from last year; SI President Debby McWhinney has previously stated a goal for the division of having $1 trillion in custody by 2010. To help achieve that growth, Schwab also announced Jan. 11 an expanded program to help entice wirehouse brokers in particular to take the road to independence by providing a number of new and enhanced services, including financing, access to real estate services, and “preferred pricing” on errors and omissions insurance.

Barnaby Grist, managing director of strategic business development at Schwab Institutional, said Charles Schwab Co. will offer five-year commercial loans beginning at $100,000, priced at prime plus one, to advisors with at least $75 million in AUM. Called Schwab Advisor Business Loan, Schwab Bank will help determine the creditworthiness of applicants and will service the loan, “but we’ll take the risk here,” said Grist, since at Schwab Institutional, “we know advisors better than anybody else.”

Through the loan program and other services offered through one-on-one “conversion consultants” assigned by Schwab to each converting advisory firm, Grist said SI hopes to “encourage 300 to 400 advisory teams accounting for $80 billion in assets to move independent by the end of the decade.”

Schwab will support the effort through a new Web site,, and through a national advertising campaign to run throughout 2007 in trade and business media such as Barron’s and The Wall Street Journal. Grist notes there will be two sets of ads–one to encourage advisors to go independent; the other preaching the benefits of independent advisors to consumers.


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