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Portfolio > Portfolio Construction

Schwab Says Advisors Are Embracing Its New Digital Onboarding Tool

By Jeff Berman

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Schwab Advisor Services is seeing increased adoption of digital authorization and other tools and services among advisors as the firm continues to enhance and expand its offerings, company executives said during its recent Technology Tuesday conference call with reporters.

The company also continues to “take advantage of” artificial intelligence and machine learning in “certain areas of our feature set” and is “continuing to explore new opportunities down that path,” Andrew Salesky, senior vice president of Schwab Advisor Services, said in response to a ThinkAdvisor question during the Q&A.

More AI initiatives are “happening to some degree on our retail side,” and his division is “trying to look at those for opportunities to explore with our advisors as well,” he said. So, there’s “definitely more to come down that path, but our focus for 2020 is largely elsewhere,” he added.

And by elsewhere, he explained, the main focus for Schwab Advisor Services this year is on “digital actions, building on our platforms” and integration activities. Earlier, he pointed out that he preferred using the term digital actions to digital workflows — the more common term — “because it really emphasizes the ease and outcome orientation that we’re trying to bring to this area of our activities.”

Digital onboarding is among the most important areas of focus for the division this year, he noted earlier on the call.

“2019 was a great year for us launching Digital Account Open,” a new tool on Schwab Advisor Center, he said, saying adoption has been strong.

“Smaller advisors actually are our best adopters” and are adopting the tool “at roughly 3 times the average rate, so we’re very pleased with that,” he said.

But right now, Digital Account Open is just for single accounts and does not integrate funding, he noted. “So, the key thing that we’re working on, and hoping to have out this year, is the ability to have multiple accounts in a single digital envelope with integrated funding instructions,” he said, adding: “We really believe that’s going to unleash a whole new wave of adoption because then it becomes something that is really attractive when you’re onboarding not just a single account or a single client but also potentially when you’re onboarding a full practice. And we’re looking to really scale our Digital Account Open capabilities in 2020.”

Another key area that the company is working on this year is “everything around platforms,” including the firm’s Portfolio Connect management solution that was launched last spring, he said.

“We greatly exceeded our expectation for year-end enrollments on the platform, with over 700 clients now utilizing the platform on a daily basis,” he said, adding the average assets under management for those clients is about $40 million.

“What you’ll see this year [are] more capabilities for larger firms that are interested in using Portfolio Connect: some data capabilities, export capabilities, bulk account management capabilities,” he said. However, he added that Portfolio Connect “will stay a Schwab custody-only solution.”

Schwab Advisor Services, meanwhile, “made a number of enhancements last year” to its Institutional Intelligent Portfolios platform, “adding mutual funds [and] having unlimited portfolios,” he went on to say, adding: “One of the big ones was also adding the ability to do account conversions through our digital account capabilities — so to convert an existing Schwab account into an Institutional Intelligent Portfolio account. We’ve seen great adoption of that digital capability…. Roughly 50% of our Institutional Intelligent Portfolio accounts are being opened digitally. So, we’re very excited about that adoption and the continued growth of that platform.”

On the integration front, he told reporters: “Everything that we build for a proprietary Schwab platform we make available for third parties to integrate into their platforms. We call that our services first strategy.”

The company now has more than 80 integration partners that we are “actively engaged with” and there are “another 15 that are in our active pipeline,” he disclosed. “Many are benefiting from” new single sign-on into Schwab Advisor Center, he said.

“What you’ll see this year is we’re enhancing single sign-on so that we can have single sign-on from third-party and client portals directly into the Schwab end client experience,” he said.

Schwab, meanwhile, knows “modern technology and digitization enables simpler processes for our clients,” according to Jon Beatty, chief operating officer of Schwab Advisor Services. “Digital tasks and transactions can lead to more streamlined operations for advisors, reducing risk of error, and so these are some of the outcomes that we are striving for as it relates to our initiatives,” he told reporters, adding: “Technology is a great enabler for driving efficiencies and enhancing that client experience.”

The company has had a “hyper focus” on digital actions for advisors, which “has to be centered on what advisors are going to be able to yield from it,” Jalina Kerr, senior vice president of client experience for Schwab Advisor Services, also said on the call.

What’s been especially “promising” is that the “adoption of our digital authorization capability, where an advisor can initiate the work [and] send it to their client for a final validation, is seeing tremendous adoption and I would say that’s being driven by a couple of” factors, she said. For one thing, “many advisors are really wanting to see a clear line of delineation on the custody rule and they’re being very careful to make sure that money movements are happening in a particular way,” she said, noting “our digital authorization tool really enables that.”

Meanwhile, “another huge reason why we’re seeing advisors leverage e-authorization or digital authorization is to combat … email fraud, and the amount of adoption that we’ve seen or the lift that we’ve seen in that electronic authorization really gives us hope and heart that advisors are starting to truly see the benefits there,” she said.

That’s an especially compelling reason to adopt Schwab’s digital authorization capability, “particularly for advisors who’ve had a scare or gone through an incident where this has occurred — for them it really drives it home,” she said.

But another major factor is that “when they’re thinking about driving scale and efficiency through their own business, it’s pretty important for them,” she said, adding: “All advisors are looking for scale plays — whether it’s the small advisor, who has to do it out of necessity, or the large advisor, who has to do it out of complexity.”

Schwab is seeing that digital actions are attracting “significant interest from advisors,” she said, noting Digital Account Open and onboarding are “regularly cited as the top area of focus for advisor firms that we’ve surveyed about their adoption interest and use.”

During the Q&A, Salesky, responding to another ThinkAdvisor question, said Schwab was only seeing a “relatively light response” to concerns over the new California Consumer Privacy Act. There’s been “really no more than a handful of client inquiries” so far, he said, adding that other industries, including social media, are probably more deeply affected than financial services.

A company spokesman said at the start of the call that the speakers wouldn’t be able to address any lingering technology or other questions regarding Schwab’s planned $26 billion purchase of TD Ameritrade.

— Check out Schwab Clears $4T Mark but Posts Big Drop in Trading Revenue on ThinkAdvisor.

Jeff Berman

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