Three of Charles Schwab & Co.’s heaviest hitters in its RIA business yesterday teed up Impact 2022 with some big reveals—one of which is that the RIA firms working with Schwab will have to hire roughly 75,000 new employees in the next five years to keep up with their growth.

Schwab also revealed that RIAs are contributing 50% of net new assets and 25% of revenue to the firm (the rest of the assets come from the firm’s banking and brokerage channels, etc.).

And the speakers talked about the ways personal indexing (or custom portfolios) will be a part of the Schwab RIA tool box.

“We are thrilled to be hosting Impact live,” said Jon Beatty, chief operating officer for advisor services, as he kicked off the conference, held this week in Denver—and in person for the first time since the fall of 2019.

This year’s crowd of 5,000 was on a par with pre-pandemic levels, and the mood at the Colorado Convention Center was borderline jubilant at times.

Given the RIA growth rate, which hit a five-year high in 2021, and the need for good financial advice in today’s challenging economic environment, Beatty said he expected the RIA model to continue to attract clients and assets in formidable numbers.

“This is when your value proposition shines the brightest,” Beatty said, addressing RIA advisors. “And I’m certain when this market turns, more and more investors will flock to your services, and we will see another wave of growth.”

When that happens, however, the industry may be facing an even bigger talent shortage than it is now. Given what he knows about Schwab’s RIA businesses, Beatty said he anticipates firms will need to hire between 70,000 and 80,000 new employees over the next five years, just to keep pace with growth.

“Talent is the number one strategic priority of firms now, surpassing even client referrals,” he said.

Following Beatty, Bernie Clark, head of advisor services, and Walter Bettinger, CEO, reiterated Schwab’s commitment to the RIA business, which at this point includes roughly 15,000 advisors using its platform.

“This is one of the most critical businesses at Charles Schwab,” Clark said of advisors. “If you look at the contribution you all make, you’re 50% of net new assets of the firm and 25% of the revenue. No one else in the industry can say that.”

Calling RIA firms the advisory model of choice and “the better mousetrap,” Bettinger agreed. “Investors want what you deliver. They want transparency. They want a fiduciary experience.”

With that in mind, Bettinger said Schwab has no intentions of slowing down its investment in the RIA business, even in a tough economy.

“We’re not cutting back; [we’re] continuing forward. We want to be that firm that you can count on long term,” he said. “We don’t ebb and flow based on what the environment is like. We think that it separates us, and that consistency is what your clients look for from you and certainly what you expect from us.”

Looking ahead, the speakers said that personalization will continue to shape the industry, driven by the combination of technology and efficiency.

“We started with mutual funds, we went to [separately managed accounts], then ETFs, now we’re heading into real personalization, and I don’t think we’re in the first inning with where we’re going with personalization,” Bettinger said. “You’ve got fractional shares, you’ve got the ability to deliver for more clients of different sizes.”

Personal indexing allows a client to adjust what's in their basket of market investments according to their own risk appetites and circumstances. What Schwab has to work out, Bettinger said, is how to offer such services at a lower cost.

“We have to get that cost down closer to where a regular ETF or an indexed mutual fund might be. And I can assure you that some of the digital investments that we’re making as measured in hundreds of millions of dollars, when some of those come to fruition over the coming months, you’re going to see us drive that cost for personalized indexing, direct indexing customization down to that kind of level,” he said. “We’re going to disrupt that industry, and it’s going to help you serve more clients.”