Schwab cuts ribbon on first franchise branch

Rolls back size and timeframe of program

Dec 14, 2011 @ 3:45 pm

By Dan Jamieson

+ Zoom

The Charles Schwab Corp. has opened its first franchised branch office.

The Nashua, N.H., location opened Monday. The franchisee, Mary Murphy, is a four-year industry veteran formerly with MML Investors Services.

Schwab had hoped to sign up its first franchisee in September, with a goal of adding 20 more next year and 40 in 2013.

Schwab is now planning for 16 new offices for 2012, with three of them coming in the first quarter, said Andrew Salesky, senior vice president of Schwab’s Independent Branch Services.

“Our objective was to open the first one prior to year-end,” he said.

About 1,500 potential franchisees have expressed an interest in the program since Schwab launched a marketing campaign last June, Mr. Salesky said.

“We’re taking the time to vet candidates,” he said.

Schwab is targeting experienced advisers as potential franchisers.

But observers said the economics of Schwab’s franchise plan make it tough for the firm to compete.

Schwab is splitting revenue 50-50 with franchisees after the fifth year of operation. Out of their half, the independent offices must cover their own rent and employee salaries, plus pay for build-out costs and technology.

Franchisees also pay an upfront franchise fee of from $25,000 to $50,000.

Independent representatives and advisers in other channels typically keep 80% to 100% of their revenue, out of which they pay expenses.

“We haven’t made any significant adjustment in the terms” of the franchising program, Mr. Salesky said. “Many of our late-stage candidates are seeing this as an attractive opportunity.”

Schwab has stressed the power of its brand to build business in pitching to potential franchise partners.

The franchise program is seen as another channel, sitting between the firm’s existing 300 existing company-owned branches and its independent RIAs. It is part of Schwab’s individual-investor business, reporting to chief executive Walt Bettinger.

The website RIABiz reported the opening of the first franchised Schwab branch today.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

What does the adviser of the future need in their toolbox?

Advisers continue to embrace all of the new offerings and products the fintech space has to offer. But what else can help them improve their business?

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

10 things clients say that make you cringe

Sometimes clients say stupid things. Here are 10 classics.

HighTower faces pressure to let investors cash out

After an IPO planned for last year didn't happen, the company could opt to satisfy its backers with a sale.

Envestnet to buy FolioDynamix

The deal, which is expected to close in the first quarter of 2018, will bring the total assets Envestnet works with to almost $2 trillion.

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print