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Schwab’s Clark on Franchises and RIA Competition, Breakaway Brokers

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In an interview with AdvisorOne following his speech at FPA Experience 2011 on Friday in San Diego, Bernie Clark spoke of Charles Schwab’s franchise expansion plans, how advisors can support their clients in volatile times and on whether there will be a greater flow of brokers out of the wirehouses and into the independent channel next year.

Schwab's Bernie ClarkAs for Schwab’s plans to create franchise-like branches, upon which there was some concern among its affiliated RIAs when the plan was first broached earlier this year, Clark (left) downplayed the possible competition to advisors. “This is a branch expansion,” he explained, with the new franchises situated at least 75 miles from existing Schwab (SCHW) retail branches.

The advisors in those franchise operations will cater to the mass affluent, he said, providing centralized, packaged investment solutions. The franchise sites, he vowed, will offer to RIAs only “the same amount of competition” as do existing Schwab retail branches.

As for the current state of the economy and markets, marked by volatility and a lack of investor confidence, Clark said advisors who can boast of consistency and depth in their relationships with those they serve are “lending their confidence” to clients.

Asked whether he expected a deluge of wirehouse brokers to break away following the expiration of their contracts with the big Wall Street firms in 2012 and 2013, Clark was cautious. “There will be anniversaries in 2012,” he said, referring to those expirations, but rather than a sudden outflux, he expects a “consistent flow” of brokers going independent.

At Schwab, he said, “We’re less excited about people coming here for a financial reason” than for the broader benefits of independence. Rather than broader movement, he expects “there will be micro trends” when it comes to breakaway brokers.

In his speech to attendees of the FPA Experience 2011 conference in San Diego, Clark said Schwab will begin this week a multimedia campaign promoting the registered investment advisor model that will include digital banners with the tagline “RIA-Stands for You. Discover the difference with a registered investment advisor,” and print publication advertisements driving consumers to an affiliated website, 

Clark said the campaign will include a toolkit for RIAs who custody with Schwab to use printed and video materials on their own sites. “The New York Stock Exchange requires” that the Schwab name be on those printed materials and website banners, Clark said in his Friday public comments, but stressed that “it’s a campaign about being independent.”

The RIA campaign includes video vignettes featuring some high-profile advisors, such as Chris Cordaro of Regent Atlantic, Gene Diederich of Moneta Group and Rebecca Pomering of Moss Adams Wealth Advisors, talking about their priorities and process when it comes to serving clients.


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