Schwab tells advisers its online advice platform won't be a threat to RIA biz

Charles Schwab & Co. defended its move to introduce its own online advice platform next year, saying it's not competition for the 7,000 financial advisers who custody assets with them. Walt Bettinger, The Charles Schwab Corp. chief executive, reassured up to 1,900 advisers gathered in Denver for Schwab's annual IMPACT conference on Wednesday that advisers are important to the company. "Advisers are core to our corporate strategy at Schwab," Mr. Bettinger said. "We believe your model is the better mousetrap." Schwab's intention to introduce its "Intelligent Portfolios" online advice platform is to give retail investors choices and allow advisers access to an electronic platform to use with clients, he said. The firm announced it was developing the online advice platform in late October.

Bettinger cites huge bull market as online providers gathered $5 billion. Not sure how they will hold up in a bear market. #SchwabIMPACT

— Bill Winterberg CFP® (@BillWinterberg) November 5, 2014

Bernie Clark, head of Schwab Advisor Services, said having an online adviser is essential for the company's retail strategy. "We have to embrace the concept that the next generation is going to want to do some of their business in this way," Mr. Clark said. Today, about $1 trillion of the company's $2.5 trillion in client assets is from retail investors. Advisers in many conference sessions pressed Charles Schwab & Co. representatives for details about the online advisory platform the investment company said it will introduce next year, and a few more details emerged. Naureen Hassan, a senior vice president at Charles Schwab, said "Intelligent Portfolios" will be available for individuals during the first quarter of 2015 and for advisers to use with clients during the second quarter.

Bettinger on defense about whether robo offering competes with advisers. It's all about giving investors "choices," he says. #SchwabIMPACT

— Frederick P. Gabriel (@FredPGabriel) November 5, 2014

She also said the platform will have a $5,000 minimum, and the tax-loss-harvesting tool will require $50,000 to be invested. Advisers using the online advice platform with clients will be able to choose which exchange-traded funds are available to clients, Ms. Hassan said. "Providing this to advisers can help advisers grow their next-gen client base," she said. Others agree that advisers can use so-called robo-advisers to their advantage. Live from Schwab Impact: Orion's Eric Clarke on how advisers can capitalize on the online advice trend Bill Doyle, an analyst with Forrester Research, said online financial advice programs will revolutionize wealth management as technology has revolutionized other industries, like the news business, hospitality and car transportation. Online advice providers are democratizing access and undercutting incumbents, and "it's unstoppable" in the wealth management industry, he said. (Related read: Schwab's robo-adviser ups pressure on advisers to justify fee structures) Even the regulatory environment supports the upstarts because they are transparent, consistent and provide an audit trail that's not contingent on human interaction, Mr. Doyle said. Of course, a Schwab robo-adviser could be competition for advisers. "All the online advice platforms are," he said. "The conflict for Schwab between advisers and their retail channel is not new," Mr. Doyle said. "With luck they'll manage this, too." Some advisers at the conference said they recognize firms are going to have to offer more if they expect to charge 1% on client assets in the future. "We're going to have to do more; offer a value proposition like that of family offices," said Brent Brodeski, chief executive of Savant Capital Management. "The challenge is how do we bring that downstream to $1 million to $20 million clients." For advisers who are not doing financial planning, "I think all robo-advisers will be a threat to their business model," said Carolyn McClanahan, founder of Life Planning Partners. "People who are real problem solvers for their clients aren't going to have any problems," she said. "In fact, it may help them with clients' children, friends, etc., that they otherwise might not serve." Schwab executives also stressed that online adviser platforms are still a very new and small phenomenon overall. And Mr. Bettinger pointed out that online financial advice providers, which have about $5 billion in client assets, haven't yet been tested under difficult market conditions. "We don't know how online advice providers will hold up when it's not a bull market," he said.