SAN FRANCISCO — Schwab Performance Technologies Inc. is waiving the $10,000 license charge for its PortfolioCenter portfolio accounting software for advisers with 50 or fewer accounts.
Instead, these advisers will pay a flat $3,000 annual maintenance fee ($2,500 for Schwab custody customers), not the $10,000 licensing charge plus the $2,000 annual maintenance fee paid by other PortfolioCenter licensees.
The move by the Raleigh, N.C.-based unit of The Charles Schwab Corp. of San Francisco is intended to aid startup advisers who are most vulnerable to sticker shock, according to Dan Skiles, vice president of technology for Schwab Institutional.
“They tell us that writing a check for $10,000 is difficult when they have just one or two clients,” he said.
“It made a huge difference for me,” said Penny Marlin, principal of Marlin Financial in Delray Beach, Fla., who has about 25 accounts and jumped at the offer when she heard about it. She chose PortfolioCenter after Schwab waived the license fee because it was priced on par with the web-based offerings of other firms.
Ms. Marlin also was disinclined to try a web solution after having used the now-defunct web offering of Mountain View, Calif.-based Intuit Inc. “I didn’t want to make a mistake with a startup again,” she said.
Yet Schwab might have gone further than advisers with 50 accounts to help smaller firms, said Robert J. Ellis, New York-based senior analyst for Celent LLC of Boston. “It sounds pretty smart [on Schwab’s part], but it sounds a little cruel,” he said.
The 50-account limit is confining, Mr. Ellis said, considering that often one client may hold five accounts. This limit is particularly daunting, considering that new advisers tend to take whatever accounts they can, which results in a higher fee structure very rapidly, he added.
Ms. Marlin said she is warily eying the 50-account limit.
To cushion the blow of exceeding 50 accounts, Schwab will credit maintenance fees toward the license fee, said spokeswoman Lindsay Tiles, adding that the license fee is $8,000 for Schwab Institutional customers such as Ms. Marlin.
Schwab’s offer is attractive because it offers one of the industry’s best software packages for advisers at a low price, according to Jim Starcev, principal of Overland Park, Kan.-based Etelligent Consulting Inc.
“But it could also be seen as a very slow reaction to Advent’s introduction of Office Essentials,” he said.
Indeed, Advent Software Inc. of San Francisco made its play for smaller advisers with Office Essentials back in 2001 with a price tag then of less than $2,000.
Although Advent declined to be interviewed for this article, it allowed that Schwab’s price drop is good for financial advisers.
“Different solutions are appropriate for different firms, so this announcement presents another good alternative for the market,” Katherine Calvert, spokeswoman for Advent, wrote in an e-mail.
Schwab didn’t see a need to react immediately to Advent’s Office Essentials, because relatively few advisers were in startup mode from 2002 through 2005, Mr. Skiles said.
Now there are hundreds of startup advisers engaging in conversations with Schwab and Performance Technologies, he added.
“We’ve gotten more traction with PortfolioCenter,” Mr. Skiles said, claiming that the software is better than the general-market alternatives, such as Microsoft Excel, used by many startups.
“Technology is so critical,” he said. “They shouldn’t be using Excel just to save some money.”