Charles Schwab is increasing fees for advisors participating in its Schwab Advisor Network referral program.
Fees will increase by 5% across the board, a spokesperson confirmed to ThinkAdvisor following an initial report published by CityWire.
“As we have shared with advisors in the Schwab Advisor Network program, after 18 years with no changes to the advisor participation fees, there will be an increase of 5% over the current fee for each asset tier,” the spokesperson said. “These changes are planned to go into effect later this year.”
The spokesperson directed industry professionals with questions about the change to the program’s disclosure brochure, which has been updated with all relevant fee information.
News of the fee hike comes about three months after the firm publicly confirmed that it was reviewing fees for participating in the network. Advisors who receive referrals from the Schwab Advisor Network pay a fee to Schwab to participate in the service, dubbed a “participation fee.” The participation fee, in turn, is calculated as a percentage of the assets in referred clients’ accounts that are maintained in custody at Schwab.
The fee is set according to a tiered asset scale. Currently, these fees are 25 basis points for the first $2 million in referred assets, 20 basis points on the next $3 million, 15 basis points on the next $5 million and 15 basis points on assets above $10 million. These fees will each be increased by 5%, meaning the lowest fee will increase from 25 to 26.25 basis points.
Advisors also must pay a one-time “program transfer fee” if referred assets are subsequently moved out of custody on Schwab’s platform.
Chip Roame, head of Tiburon Strategic Advisors, previously told ThinkAdvisor he was not surprised to see Schwab reassess fees for the referral program.
“[Schwab] has not raised the fees in a long time … and custodian referrals are valuable!” Roame said in an email. “Custodian referrals account for about 20% of the net new [assets under advisement] for independent advisors.”
There are currently about 140 firms participating in the program, a small fraction of Schwab's overall advisor client base of nearly 15,000 registered investment advisors.
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