After almost two decades of no change in pricing, as well as incredible growth in the financial advice industry, registered investment advisors that get valuable referrals from the Charles Schwab Corp. will pay more for that client information.
Called the Schwab Advisor Network, the referral program has not changed its fees in almost 20 years, according to the company. Now, RIAs later this year will face an increase of 5 percent.
That means Schwab will charge a shade more than 26 basis points on the first $2 million in client assets. The fee is significant; an industry rule of thumb is for advisors to charge roughly 1 percent – 100 basis points – on client assets.
“As we have shared with advisors in the Schwab Advisor Network program, after 18 years with no changes to the advisor participation fees, there will be an increase of 5 percent over the current fee for each asset tier,” a spokesperson from Schwab wrote in an email. “These changes are planned to go into effect later this year.”
InvestmentNews in November reported that Schwab was mulling over the possibility of bumping up fees for the program.
RIAs who want to work in Schwab’s referral program should have at least $250 million in assets under management when starting with the service. The fee advisors currently pay to Schwab is 25 basis points, or 0.25 percent, on the first $2 million of client assets. The percentage decreases after that for larger accounts.
In November, one financial advisor raised the question of who was going to pony up for the fee increase: The financial advisor, or the investor that just bought an RIA? Regardless, getting referrals from Schwab will be more expensive for RIAs in the program.
“You're the CEO of a private equity-backed agglomerate of RIAs whose principle source of net new account growth is paying fees to Schwab's referral program to rent access to their clients,” wrote Josh Brown, CEO of Ritholtz Wealth Management, in a post on LinkedIn. “And then this hits.”
“What do you tell your advisors?” he asked. “What do tell your equity shareholders? The basis points are going to have to come from somewhere... Who's giving them up?”
It’s not clear how much annual revenue Schwab generates from its Schwab Advisor Network referral program.
But the program is undoubtedly significant for some RIAs. Peter Mallouk’s firm, Creative Planning, with $325 billion in client assets, receives client referrals from Schwab through the program, according to its Form ADV. Creative Planning also uses other client referral programs.
After a client reaches $2 million in assets, the percentage amount Schwab currently charges decrease: 20 basis points on the next $3 million, 15 basis points on the next $5 million and 10 basis points for amounts over $10 million.
RIAs that use Schwab as a custodian get the referrals from Schwab’s network of retail branch offices. The fee to advisors is not a one-time transaction but rather charged in perpetuity.
About 140 RIAs use the Schwab referral program.
From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.
Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.
“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.
Sellers shift focus: It's not about succession anymore.
Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
