Schwab reassures RIAs its brokerage advertising won't take business away from them

Firm says the ads are targeted to the mass affluent, not high-net-worth investors advisers focus on

Oct 29, 2018 @ 1:50 pm

By Mark Schoeff Jr.

Charles Schwab Corp. chief executive Walt Bettinger tried to reassure registered investment advisers who custody their assets with the firm that its advertising push for brokerage clients isn't taking business away from them.

During the opening session at Schwab's annual conference in Washington on Monday, Mr. Bettinger and Bernie Clark, executive vice president of Schwab Advisor Services, touted a recently launched ad campaign focusing on its RIA platform.

But the audience in the cavernous convention center ballroom seemed concerned about Schwab's efforts to build the brokerage side of its house, submitting two questions to the Schwab leaders about the brokerage advertising.

Mr. Bettinger said RIAs shouldn't worry, because the brokerage ads target so-called mass affluent investors, who are generally defined as clients with $250,000 to $1 million in assets, rather than the RIA's market segment.

"The RIA is our principle solution for high-net-worth investors," he said.

If an investment adviser on the Schwab platform believes he or she is competing with Schwab brokerage for a customer, the adviser will prevail.

"We will stand down on the retail side," Mr. Bettinger said.

He also countered the perception that Schwab's robo-adviser could drain clients from investment advisers on its platform.

"The idea that our robo-platform, the digital platform for the retail side, will be a threat to RIA clients is pretty low," Mr. Bettinger said.

Schwab Advisor Services works with more than 7,500 investment advisers who have about $1.6 trillion in investments under management. The brokerage side of Schwab has $1.8 trillion in AUM.

Mr. Clark said Schwab advertising is meant to get people to ask more questions about the costs and risks of investing.

"It's about creating more movement of assets to Schwab, absolutely," Mr. Clark said. "But for you also, because many of those assets are more well-suited for your model."


Later in the morning, Schwab released its latest Independent Advisor Outlook Study, which showed that 95% of the 783 advisers surveyed said "acting in a client's best interest" is a key way that advisers differentiate themselves from brokers.

Investment advisers are held to a fiduciary standard of care, while brokers must meet a suitability standard. The fact that Schwab puts a lot of effort into advertising for the suitability side doesn't faze April Bortscheller, vice president of operations at Berger Financial Group.

"We haven't really seen that that's a threat to us at all," Ms. Bortscheller said during a media panel about the adviser survey. "I don't feel that they are encroaching on any of that business that we have."

Steven Elwell, partner at Level Financial Advisors, isn't worried about the Schwab brokerage ads because his firm has carved out a niche working with younger retirees and specializing in tax planning.

"Our specific firm doesn't share those concerns," Mr. Elwell said during the media panel. "But I can understand other advisers who maybe haven't narrowed in what they're focusing on or really focusing mainly on investments [rather than] financial planning ... why they would ask the question."

Together, the Schwab brokerage and RIA operations account for about 7% of the financial advice market. The firm's ads are designed to increase that number, regardless of which side the client falls on.

"It's the 93% we're trying to win," Mr. Bettinger said.

The conference, known as Schwab IMPACT, has drawn about 5,000 attendees.


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