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Schwab Attracting Advisors, Assets from Wirehouses

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George W. Bush and Ben Bernanke headlined the Schwab Advisor Services Impact 2014 conference held in Denver in early November, which was expected to draw some 1,700 independent advisors, 300 exhibitors and 250 employees of the largest RIA custodian.

At the event, Schwab Advisor Services senior managing director Tim Oden shared that the business is making inroads by capturing the assets of wirehouses advisors—at least the most entrepreneurial among them, he says.

The number of recruited teams in the most recent reporting period of 2014 fell 17% from last year, he says, but the level of net new advised assets rose 19%.

This means the “average deal size has gone sky-high,” Oden explains, noting that the average size of advised assets in its recruited teams has increased 31% to a new peak of $144 million. Plus, year to date, the proportion of net new assets coming from wirehouses is more than double the previous year’s pace.

Key strategic investments the firm has made in recent years now give Schwab the ability to attract advisors who six or seven years ago would have taken a pass, given the custodian’s lack of certain “sophisticated solutions” at that time, the executive shared.

For example, the existence of Schwab Bank enables advisors to collateralize portfolios through loan facilities, so wirehouse advisors with clients that have loans or lines of credit can replace them once these client accounts are transferred.

The firm also now has “consultative resources” to help advisors who want to accelerate their business growth or take their service model up a notch, Oden says.

“Long before you bring a single dollar to us,” he said, a Schwab consultant will sit down with a wirehouse (or other) advisor who, for instance, wants to build a digital presence. The consultant will provide tools and templates that are aimed at increasing client engagement.

If advisors are seeking to expand their practices by 15%, the consultant will work with them to determine a reasonable growth rate, which might be higher or lower than 15% based on proper benchmarking, and help with the operational steps needed to achieve such a target.

Those are the sort of things one would normally need a high-end consultant for, Oden says. And to the extent that such resources are available to wirehouse advisors, they often come with a “product bias” or are exclusively reserved for the most elite teams.

The availability of these resources was timed for the “sun-setting” of compensation packages that locked in many a wirehouse advisor over the past several years. “Advisors now have the opportunity to evaluate whether taking another deal makes sense,” explained Oden.

“They’re looking for alternatives—not necessarily where they can get the most money, but best lifestyle, succession opportunities. They already have wealth,” he says.

The Schwab executive describes one recruit who found a wirehouse’s compliance restrictions too difficult in terms of engaging younger clients—who might, for example, prefer texting or video-based forms of communication. “If you’re an independent, nobody will tell you [that] you can’t have a blog or Twitter account,” Oden shared.

A year and half into independence, that ex-wirehouse advisor has seen billable revenue increase by over 20%. “His [approach] resonated with small-business owners,” said the Schwab executive.


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