Schwab tells RIAs its wealth arm isn’t 'competing for new business'

Schwab’s fast-growing in-house wealth advisory business isn’t competing with RIAs for clients, CEO Rick Wurster said at the custodian’s IMPACT conference in Boston.

The Schwab Wealth Advisory (SWA) business started with four offices and has grown to around 25 across the U.S., serving Schwab retail investors who may want to pay for advice from its internal team. On stage at IMPACT, Wurster was asked “how do you reconcile” expanding SWA’s footprint while maintaining that Schwab isn’t competing with RIAs for clients.

Existing clients only, Schwab says

“The folks in those [SWA] offices are not going out into the local community and competing for new business,” Wurster said. “They are working with our existing Schwab clients that we have built relationships with over years, decades, and for whom likely their financial complexity and wealth has changed while they’ve been a client of Schwab.”

Net flows into Schwab Wealth Advisory rose 55%, the brokerage said in its third-quarter earnings report on Oct. 15. Schwab also has more than 400 branches serving retail investors, which Wurster said hold $7 trillion in assets across about 30 million accounts.

“Those wealth advisors in those local communities do not go out into the local market looking for new wealth business,” Wurster said. “When [retail investors] want advice, we want to be able to serve them. We have two ways of serving them through our Schwab Advisor Network and through Schwab Wealth Advisory, and we do that across 24-plus offices across the country.”

Nearly 17,000 RIAs custody with Schwab. The growth of SWA comes as Schwab has raised its asset minimum for Schwab Advisor Network (SAN) client referrals to $5 million, a move Windward Recruiting president Chris Bisenius said reduces client lead flow for RIAs in SAN.

More than 6,000 people attended Schwab IMPACT, the industry’s largest event for RIAs. Doubling down on the message that Schwab isn’t competing with RIAs, Jon Beatty, head of Schwab Advisor Services, said, “We don’t advertise on televisions for Schwab Wealth Advisory because it is a resource for our financial consultants to serve their clients as a hub of financial advice.”

A ‘catcher’s mitt’ for smaller RIAs

Last year, Schwab canceled planned outreach to investors holding $1 million or more in Schwab retail accounts after RIAs that custody with the firm raised competition concerns. With Fidelity planning to end custody services for RIAs with less than $100 million on its platform, Wurster said Schwab remains committed to small advisory firms.

“We couldn’t be more committed to the RIAs on our platform of any size, including those with less than $100 million,” Wurster said. “Not only are we not backing away from this market, we want to be the catcher’s mitt to help you all, help your clients if you’re [an] RIA in that position.”