T3 conference organizer Joel Bruckenstein broke the big news last week that Charles Schwab’s tech team has made a big shift in its strategy: Its next-generation portfolio management product, PortfolioConnect, will not be multi-custodial as it had planned.
Instead, the firm — which has $1.8 trillion in advisory assets and works with about 7,500 independent advisors — will invest in its core custody platform and also fund improvements to PortfolioCenter, the current multi-custodial portfolio management and accounting tool. Plus, it will financially support third-party integration work.
This week, tech vendors at the Orion Ascent National Conference in Miami Beach, Florida, are reacting to the news and what it means for their businesses and advisor clients. “They are happy and ecstatic,” according to Tim Welsh, head of the consulting group Nexus Strategy.
“It’s about the tech component for [Schwab’s] portfolio accounting system,” Welsh explained. With this opening up, he explains, traditional vendors like Orion, Envestnet Tamarac, Black Diamond and others are set to benefit.
But smaller firms, like Panoramix and Capitect are stoked, too, by the change. “All the third-party vendors [at Orion Ascent] are excited to see Schwab open up,” he said.
While rival TD Ameritrade has relied on vendors to drive innovation for some time, “Schwab now is going to do so,” according to the consultant, who led business consulting services for Schwab Institutional from 1999 to 2005. For instance, it will work with application programming interfaces (or APIs) made by outsiders.
“We are actively developing our APIs and leveraging those for our proprietary platform and for third parties,” said Andrew Salesky, senior vice president of Schwab’s Digital Advisor Solutions, in an interview. “For example, we’ve been participating in the Orion hackathon event at the Ascent conference.”
For Bruckenstein, Schwab’s “revised strategy” is “a net positive … based upon the feedback provided by their advisors,” he said in last week’s blog. In addition, it will likely “reverberate throughout the advisor tech industry.”