Eager to put two years of change, and even some strains, behind them, the top brass at Charles Schwab are accentuating the positive, including efforts to bring new capabilities to ultra-high-net-worth-clients and a willingness to offer direct investment in bitcoin as soon as regulation allows.
Three of the company’s top executives addressed these issues at IMPACT 2024, Schwab Advisor Services’ annual RIA conference, held this year in San Francisco.
Among the speakers was Jon Beatty, head of Schwab Advisor Services. Also addressing the audience was Walt Bettinger, the outgoing CEO of Charles Schwab, and Rick Wurster, the company’s president and incoming CEO.
The three wanted to emphasize the benefits of being an advisor with Schwab’s platform after two difficult years in which the company acquired and integrated TD Ameritrade and reshuffled its top leadership.
Beatty became head of Schwab Advisor Services just five months ago when longtime head Bernie Clark transitioned to an advisory role. Beatty now says Schwab has never been more committed to its RIA business.
“RIAs continue to be the fastest growing segment of financial services,” Beatty said. While there are more than $37 trillion in investor assets in traditional advice models in the U.S., he said, the RIA industry manages just $9 trillion by comparison, and that gives the fiduciary model plenty of opportunity for growth.
To grab more of that market share, advisors will have to evolve to meet the needs of clients, he said. Already RIAs are on that path to adding value as they’ve moved from investment management to financial planning, estate planning, charitable giving and now tax planning.
But there are steps firms can take internally, too, perhaps by “adding a chief growth officer with a dedicated business development team, a team that can help firms operate with intention around growth,” he said.
In particular, Beatty said Schwab is continuing to be a strong advocate for RIAs in Washington, D.C., as well as promoting the RIA business to the most desirable clients.
“We're actively championing the industry among ultra-high-net-worth investors with our ongoing Independent Difference Campaign,” he said. “We’ve dedicated tens of millions of dollars to run TV, print, digital, and social ads every year.”
Rick Wurster, the company’s president who will take Bettinger’s place as CEO at Schwab on January 1, 2025, said one of the company’s strengths has been its stability: He’s only the third CEO since 1987.
“I want you to know that when I invest in something, it matters a lot to me. When we invest in something at Schwab, it matters a lot to us,” he said. “In terms of growth, we've spent hundreds of millions of dollars on our platform to support you.”
That has included rolling out iRebal, the portfolio rebalancing tool that TD Ameritrade advisors have been using for more than a decade. The firm is also enhancing the Schwab Advisor Center custody and trading platform, and it’s building a seamless digital onboarding capability, Wurster said.
Still, in other IMPACT sessions, some advisors brought up the technical challenges they continue to have with some of that functionality.
Lending And Crypto
The firm has also leaned into lending for top-tier clients. Whereas that has usually required a 30-day process involving paper filing for a pledged asset, the firm has moved to a one-day digital process, he said, adding that Schwab is further investigating its ability to lend on different types of non-traditional collateral, including private equity investments.
“We recognize that if we can't help your client with their specific lending needs, oftentimes you're having to introduce them to J.P. Morgan or Morgan Stanley or Goldman Sachs,” he said. “While, yes, they love the lending, they're likely also interested in the wealth side of that relationship. We want to do everything we can not to put you in that position.”
Another area with room for attracting new assets will be direct investment in cryptocurrency, especially bitcoin. Wurster said that while clients can currently get exposure to crypto through exchange-traded funds, Schwab looks forward to offering direct crypto trading.
“What's held us back from doing that is not a point of view about the value of crypto and the role in a client's portfolio; that's for you all to decide,” he said. “What's been holding us back is the regulatory environment and the way crypto assets are treated on our balance sheet. Our expectation is that regulation will change and, as a result, at some point we will offer direct access to crypto.”
Wurster told his audience that RIAs represent half of Charles Schwab’s assets and more than half of its growth. “There is a bull market for advice, and independent advisors are winning.”
The retail business is also important to the company, he said, but there should not be competition between the two sides. “We have collectively about a 13% or 14% share of the market, which means there's 86% of the market that we're not touching. Let’s go after that.”