Bernie Clark, executive vice president of Schwab Advisor Services, said the custodian will roll out a program in the first quarter of 2012 to help junior partners in RIA firms finance purchases of larger equity interests from senior partners.
Succession planning is one of the most intractable problems in the RIA business. Often, junior partners in RIA firms must take on substantial amounts of debt to buy out senior partners, and lenders are scarce. One alternative is that senior partners sell their interests to younger partners at significant discounts, a choice many senior partners find unattractive.
TD Ameritrade Institutional CEO Tom Bradley has also indicated that his firm will introduce a similar program in the first quarter. Other custodians, including Fidelity and Pershing, do acquisition financing on a selective basis.
Though Clark did not spell out the details of Schwab's program, the fact that he said it would facilitate succession or transition planning within firms makes it somewhat similar to what Fiduciary Network's CEO Mark Hurley is doing.
From what little Clark said, it sounded as though the Schwab program would be designed to allow firms to maintain their independence rather than consolidate several firms into a single entity.
In the past, Schwab has provided financing for a few outright acquisitions, including Aspiriant's purchase of Deloitte's advisory arm. In that transaction, Schwab required Aspiriant to keep custody of more than $3 billion in assets at Schwab.
Presumably, all the custodians see acquisition and junior partner financing as a means of retaining RIA assets.