Schwab's customer service tests advisers' patience — and loyalty

The $22 billion acquisition of TD Ameritrade Institutional by Charles Schwab Corp. was bound to introduce a few hiccups as two of the industry’s largest custodial platforms are melded together over the next few years — but for some financial advisers, patience is running thin as service drops off.

“We’re finding that service times for things like asset-backed loans and adding margin agreements, that used to take 24 hours, are now taking two weeks, and that’s just unacceptable in this day and age,” said James Gambaccini, managing partner at Acorn Financial Services.

Overseeing a firm with $1.2 billion in client assets, Gambaccini has custodial relationships with TD, Schwab, Fidelity and Pershing, and said Schwab’s service declined as soon as they went remote due to the pandemic.

“Schwab did a terrible job going remote and they never recovered,” he said. “And TD did a great job going remote until October when Schwab laid off TD’s service team.”

Michael Baker, an adviser at Vertex Capital Advisors, took his complaints to social media by calling out TD-Schwab representatives for being unresponsive to inbound calls from advisers. “Serious question — has service from @TDA4advisors fallen off a cliff … or is it just me?” Baker tweeted last week.

In a follow-up conversation Tuesday morning, Baker confirmed his suspicions. “My sense is that things are not being blown out of proportion,” he said. “The consensus from many of my peers is that service has declined.”

The challenges, however, are apparently not universal, according to Kevin Williams, who in the process of establishing a new state-registered firm, Full Life Financial Planning in Pembroke, Massachusetts.

“In launching my RIA, I feared the disruption from the TD-Schwab transaction might cause, but the support I have received has been exceptional, and I am very much looking forward to working with Schwab as I build my practice and confident in the service they will provide for both my firm and my clients,” he said. “Maybe I got lucky, but now this is all concerning, because maybe I’ll be less happy once I’m fully onboard with them.”

For its part, Schwab acknowledges the customer service lapses. Spokesman Rob Farmer was unable to make anyone from Schwab available for comment for this story, but offered the following statement:

“We are aware of instances over the past few months in which we have not met our usual high standards for client service.  These issues are the result of a confluence of challenging factors, but importantly, they are not due to the ongoing integration of Schwab and TDAI.

“Among the contributing factors is the incredible growth of the independent advisor industry at large. As a result, we experienced an unprecedented spike in volume, which impacted service levels for some advisors — primarily occurring in December of last year and into January of this year.”  

The acquisition of TD officially closed Oct. 6 and is expected to take up to 36 months to complete.

“We are doing all we can to stay at pace with the sudden burst of growth, increasing our capacity through aggressive hiring and continuing to ramp-up our technology,” according to the Schwab statement. “Our teams are working overtime, and we continue to make outsized investments in both people and technology development to meet and enhance the expectations of our clients.”

But as Schwab navigates the cumbersome undertaking of bringing together thousands of financial advisers and more than $6 trillion in assets under one roof, the broader custody industry is not sitting idle waiting for the fallout.

“We’re doing everything we can to campaign to those advisers to show that we’re a good fit for them,” said Robb Baldwin, chief executive officer of TradePMR, a custodian servicing approximately 400 RIAs.

Baldwin knows the current TD-Schwab service glitches are an opportunity for competitors to gain market share because he founded TradePMR after the experience of working for Jack White & Co. when it was acquired by TD Waterhouse in 1998.

“That was when technology was in its infancy and I lost about $10 million of my clients’ assets through that merger and it took 60 to 90 days to get all my clients’ assets into their new accounts, which gave me a black eye with my clients because they knew that I picked the custodian,” he said. “You’re going to have to be a very large adviser to get the attention you deserve at Schwab right now.”

Ben Harrison, head of advisor solutions at BNY Mellon’s Pershing, is also ramping up efforts to remind advisers that they have choices when it comes to custodial services. In addition to having already lowered adviser asset minimums to $100 million from $250 million, Harrison said Pershing is hiring to “build out our service team.”

“A dedicated representative is not a call center because that’s what works and that’s what advisers want,” he said.

A statement from Fidelity Institutional head of client experience Joe Kurtzer said 2020 new custody accounts were up 40% over 2019, suggesting the upside for the broader custody space.

“Supporting our clients is a top priority for us, and the Fidelity Institutional client experience team continues to receive extremely high marks from our clients regarding service, notwithstanding record call volumes and record new accounts over the past year,” Kurtzer wrote in a statement. “We also continue to see a significant increase in inbound calls from firms that want to diversify and work with a custodian that has the combination of exceptional platform, products and service that we offer at Fidelity.”

As the custodian industry rolls out the welcome mat after service issues at TD-Schwab, advisers such as Gambaccini are starting to pay attention.

“The fact that we aren’t having the same issues at other custodians tells me we’re probably in for a lot more pain at TD and Schwab, and that kind of thing always opens the door for somebody to step up and build a better service,” he said. “Switching custodians is a big endeavor but part of being independent is to always be looking for a better alternative for your clients.”