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Schwab Advisor Services Boss Lays Out Growth Strategy

By Crucial Clips     February 15, 2017
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ @ Schwab Impact 2016, Oct. 26, 2016 

BRUCE LOVE, MANAGING EDITOR, FINANCIAL ADVISOR IQ: Hi, this is Bruce Love with Financial Advisor IQ, and I’m here with Bernie Clark, the head of Schwab Advisor Services. Bernie, Fidelity’s been quite aggressive in building its consulting services business, presumably to strengthen relationships with RIAs and its custodial business. What have you guys been doing?

BERNIE CLARK, EVP, SCHWAB ADVISOR SERVICES, CHARLES SCHWAB: I have, for many, many years now, believed that consulting – bringing more intellectual capital capabilities to the marketplace – will be our secret sauce of the future. And I’ve seen that others are emulating the strategy that we put in place some time ago. And so we’ve been consulting with advisors on their strategic planning, their succession planning, creating cultures of referral within their organizations and helping them to grow, helping them make sure that they have plans for the future. We think that’s critically important.

We’ve recently launched a consulting program around cybersecurity – you know, helping to keep some peace of mind in this very, very challenging area and making sure they’re shoring up some of their tools against some of what could be going on in the marketplace. We launched an executive leadership program, the first of its kind in the industry. Again, I think others are copying. But the truth is we’ve had over 100 graduates, now, of the next generation leaders.

Some of our largest firms who go through a year learning course with us create a learning cohort amongst themselves. And they’re all over the building here today. It’s so exciting. So many of the individuals I’ve worked with for so long, I’m now meeting their next leaders. And they’re bringing them into the conference.

That coupled with lots of work we’re doing on, really, the benchmarking insights within the industry, the independent advisor outlook study – we think that’s critical. And internship programs – making sure that interns come in, we do something, a little bit of a twist on internship programs. We bring in 20 or so individuals from around the country every year into our offices. They work with us for five weeks. They work with an adviser for a week.

And then we won’t hire them. We want the advisors to hire them. And they do. And I’m also starting to see those individuals showing up at Impact, which is so much fun. And they’ve been hired by advisors in Texas or Virginia or somewhere across the country where they’re from. And it’s really a virtuous cycle that we’re starting to create here.

And so I also think about it as a reasonably non-competitive space. Doing what’s good for this industry with the amount of facets that still sit in traditional models is good for everybody. And I think there’s a lot of growth that can be had and some $23 trillion of assets that are not being served as well as I think they could be served in the independent space.

BRUCE LOVE: Bernie, how does Schwab Advisor Services balance servicing financial advisors as part of a larger organization that also offers its own wealth management services?

BERNIE CLARK: Advisor Services within Charles Schwab, we’re the largest in the industry. We have over $1 trillion in advisor assets. And that’s twice as large as our next closest competitor. As importantly, we are more than a quarter of the firm’s revenue and almost half the firm’s assets. It is a very big part of Charles Schwab that no one else can kind of claim that space. And that’s important.

But also, what’s important is our firm works together in trying to understand what’s best for clients. We call it "seeing through clients eyes." So we’re creating solutions that make sense to them. And we’ve long been believers that investing is a continuum. And people will enter at different points in that continuum in their investing lives.

And we think it’s critically important that we have the services for people who want to be self directed and are beginning investors in some cases and those who mature into wanting some advised solutions – of which we have some within our retail businesses that serve clients quite well – and then moving to a more-customizable, high net worth worth space, which we consider to be the advisors. In fact, we have programs where we refer assets to advisors from our retail businesses when it makes sense. And they’ve been quite successful.

And so, really, the businesses coincide well with the fact that clients have a long life of investing. And, at different points in time, they will want different services. The advisor is highly customized and, generally, on the high-net-worth side. So it plays out to really have that whole spectrum and keep a client at Schwab, hopefully, for life.

BRUCE LOVE: Bernie, what’s your organization doing to help FAs comply with the DOL rule?

BERNIE CLARK: Well, you know, we started long before the rule came out. We helped to influence the DOL into what we thought would be better regulation and talked to them about what some of the exemptions and needs should be in the marketplace, where some of the opportunities were. And because of the firm that we are and the representation we have, I think we had good audiences. And they listened. And we worked very closely with them on those things.

Now we’re writing white papers. We have information for our clients. We’re consulting with them where that helps. And we’re also encouraging them to make sure they’re using their in-house compliance and legal talents to design their businesses to make sure they’re complying in the way they should. We’re also reasonably encouraging about talking to them about the fact that this has come into the taxable space, this fiduciary standard as well.

Now, these people started as fiduciaries. So it’s not as hard if you think about what’s happening there. But they really do rely on us both to advocate for them but then to help them educate and to help them grow into a model that will actually ensure the safety of the assets for their clients and that they’re handling them the right way.

BRUCE LOVE: Bernie, thank you very much.

BERNIE CLARK: Thank you, Bruce. It was great.