Schwab-TD integration on track with more layoffs expected: Bernie Clark

Head of Schwab Advisor Services Bernie Clark gave progress updates, while unveiling the firm's annual Independent Advisor Survey Outlook. Results showed sweeping adviser optimism and lessons learned from 2020.

As Charles Schwab Corp. continues to integrate TD Ameritrade Institutional on a 36-month schedule following the October 2020 acquisition, there will likely be more layoffs, according to Bernie Clark, head of Schwab Advisor Services.

Speaking Monday during a press conference highlighting Schwab’s annual Independent Advisor Survey Outlook, Clark acknowledged the “duplication of roles” in some positions have resulted in people leaving the combined entity.

“We have materially accomplished the synergies we needed to,” he said, when asked if there will be more layoffs resulting from the integration.

“That’s not over,” he said of the layoffs, while adding the job cuts are “not impacting client facing individuals.”

Clark also confirmed that full integration of the two giant companies, which was originally estimated to take between 30 and 36 months, will be “closer to 36 months,” meaning October 2023.

The survey findings reflected a largely bullish outlook for the wealth management industry, particularly when compared to responses from August 2020.

When asked if the registered investment adviser space has not yet fully matured and will continue to grow at a higher rate than the market, 47% of adviser respondents agreed, compared to 33% last year.

Asked if the RIA industry has hit its peak and will start to stabilize, 4% agreed, down from 7% last year.

Timothy Admire, president and chief executive of Willow Creek Wealth Management, who joined Clark on the media call, said his firm is enjoying a boost from client referrals, which he attributed to “keeping clients in their seats” throughout the uncertainty of a global pandemic.

“A lot of our growth still comes from client referrals,” he said, adding that the independent advisory space still has work to do in terms of educating clients about the financial advice business.

“Most investors still don’t know what an adviser or fiduciary is, but they all know what a broker is,” he said. “There’s lots more work to do.”

Year over year, the outlook from advisers hasn’t changed much, with the exception of taking Covid-19 off the table as a big potential barrier to growth.

In the latest results, 27% of advisers cited new forms of competition as the top barrier to growth, compared to 23% last year.

Cost of doing business came in second at 15%, up from 13% last year.

Challenges related to scaling the business to serve more clients, was third, with 14% of advisers listing it, compared to 11% last year.

The outlier in terms of barriers to growth was Covid, which ranked as the second biggest growth barrier last year at 19% but has declined to 4% in the current survey.

In terms of growth, the survey respondents are mostly bullish, with 62% advisers expecting “accelerated growth after time of change in 2020,” and 94% of advisers expect asset growth in 2021, with 92% of the growth expected to be organic.

In line with much of the world during the global pandemic that forced remote work, technology adoption, and innovation, RIAs say they adjusted and even thrived in 2020.

Half of the advisers surveyed said they acquired more new clients in 2020 than in previous years, and those new clients are described as generally younger, more diverse, wealthier and more tech savvy.

Part of what made 2020 such a banner year for client recruitment, according to Admire of Willow Creek, was the general acceptance of virtual interactions that took geography out of the equation.

Asked about lasting impacts from pandemic life, 62% of advisers expect to regularly use video conferencing for client communications, 40% will allow more staff to work remotely, 33% are embracing more online solutions for client servicing, and 25% plan to attend more virtual industry events going forward.

Recruiting staff and other advisers has also evolved with the expanded use of various technology.

Half of all advisers surveyed said the lasting effects of remote work is changing the way firms recruit talent.

“Talent has been really tough to find for us,” said Admire. “There’s just not enough people coming into this industry to meet the talent demand, and that will be a major strain on growth and capacity if we don’t solve for it.”

While remote work allows firms to “cast a wider net,” he added, “everyone else is able to cast a wider net also.”