Charles Schwab’s top leaders used the firm's annual IMPACT conference this week to apologize to the firm’s 15,000 affiliated advisors, especially the 7,000 advisors who used TD Ameritrade as a custodian and may have experienced a rocky onboarding of their 3.6 million accounts post acquisition.
The conversion “was imperfect, and we all recognize that, but we’ll continue to work hard to address issues you raised,” Walter Bettinger, CEO and co-chairman of the board, told nearly 3,000 advisors at Schwab’s IMPACT conference in Philadelphia Wednesday.
Schwab reportedly misplaced a number of former advisors’ million-dollar-plus client accounts during the process of converting them to Schwab’s new platform, assigning them to incorrect practitioners instead. As a result, advisors could not access client portfolios for 24 hours or more.
Advisors also criticized the firm for being slow to answer customer service calls and make corrections over the past year. A long-time advisor and Schwab client at the conference who spoke on condition of anonymity said she lost one high net worth client and almost lost a second client because of Schwab service snafus she chalked up to the firm diverting resources to work on the Ameritrade conversion.
"I think the worst is over now," said the advisor, who said she plans stay with Schwab if there are no more major issues."I'd been happy with them for more than 15 years, but this was rocky," she said.
Bettinger said he thanked all of Schwab's affiliated advisors for telling the firm’s story, but offered “particular gratitude to all the former Ameritrade advisors. You have gone through a tremendous amount of change this year. The time and energy you’ve put in for the conversion was significant. I don’t want to discount that in any way,” he said.
Schwab President Rick Wurster, who shared a stage with both Bettinger and Bernie Clark, the company’s managing director and head of advisor services, thanked all the firm’s advisors for allowing Schwab executives to take the past two years since the acquisition to pick the best of what both predecessor firms offered, “to make sure it’s the best custodial offering we’ve ever had.”
“We’ll face hurdles,” Clark acknowledged. “Things will be imperfect at times, but if anybody in this room isn’t feeling listened to or heard about what’s going on, that’s a fatal flaw for us. We’re going to work on everything and are addressing issues you’re bringing up already,” Clark said.
“We know most [complaints] are experiential, but that’s important. That’s how you run your business. We certainly don’t want you spending time away from your clients. We will find our right place in all of this,” he added.
Despite challenges in 2023, the firm continues to offer advisors and clients security, safety and stability, Bettinger said.
The firm just wrapped up its 12th consecutive quarter with adjusted pretax margins of more than 40%. “I say adjusted because that’s just excluding the onetime cost of the configuration of the Ameritrade acquisition,” Clark said.
“Those margins give us great room and great comfort in terms of challenging times. And of course, many of our competitors would love to have those results,” Bettinger said.
On a risk-adjusted basis, Schwab “is at the top of virtually all institutions. Yes, it’s a challenging year. We don’t measure our performance in any given year with how our stock price does, but how we serve our clients,” Bettinger said.
Schwab stock was trading at $49.34 this morning, down from a high of $95.53 on January 4, 2022.
During the general session, an advisor asked the executives why the firm was directly competing with advisors via its retail channel.
Bettinger said all three of the top players in the custody world offer products and services directly to investors via a retail channel. “There is competition across the industry. Together we have 12% of the market. That’s 88% of the market we don’t have, whether custodial or retail. Let’s go after the 88% together.”
In the “rare circumstance” where an advisor finds him- or herself in direct competition for a client with Schwab retail, he urged them to email or call him.
“We will stand down. In a decade or longer that I’ve made this offer, I’ve gotten two calls. In both cases we stood down and the advisor ended up working with those clients. We want to be deferential to the relationships you trust us with,” Bettinger added.
Clark urged advisors whose “experience isn’t quite right” to call or email top Schwab executives, including him. “We may not have every answer, but give us the first chance before you spring out into another place. The world is wrought with a negative story. I want to tell you a positive story,” he said.