As investment management becomes commoditized, advisors must expand their service menu in order to avoid fee compression, according to executives at Schwab Advisor Services.
 
That point was hammered home Tuesday during the opening day of Schwab’s annual Impact conference, attended by close to 2,000 of the firm’s independent advisors.
 
Most advisors price on assets, but “maybe 25 percent of their value is from investments,” said Bernie Clark, head of Schwab Advisor Services. Clients will increasingly see value elsewhere, he warned, in things like tax planning, estate planning and life coaching.
 
Advisors will need to “extend themselves in these [other] services that don’t scream out for commoditization,” he told reporters.
 
“We know the investment management process is declining in value in the eyes of clients,” added Jon Beatty, senior vice president of Schwab Advisor Services. That  explains the movement to wealth management, with advisors helping with life planning, generational wealth transfer and downsizing in retirement.
 
According to Schwab’s independent advisor outlook study, released today during the conference, 61 percent of surveyed advisors said that changing their service model to meet the changing needs of clients is the most critical issue they face in the next 10 years.
 
Technology will be instrumental in delivering the more commoditized services so that advisors’ time and staff are freed up to deliver higher value items that clients demand, Schwab execs said.
 
The push to get advisors to differentiate themselves and focus on higher value services mirrors Schwab’s corporate strategy.
 
Chief executive Walt Bettinger told the assembled advisors Tuesday that he sees less differentiation within the industry.
 
"Wirehouses are working hard to look like you,” he said, and the new DOL rule will force more firms than ever to get advisors to use fee-based platforms.
 
Schwab itself is moving away from transactions, Bettinger said, noting that in the third quarter of this year transaction revenue at the company was just 10 percent of revenue, the lowest ever.
 
“And we want to drive that lower,” he said.