Is anyone else confused?
It appears that Charles Schwab is going to start bankrolling Independent Advisors. I thought they were dumping the IA business. It’s not that Schwab said this directly. But as my grandma always said, actions speak louder than words.
Note: Although Matt and I both posted about this at the same time, we have very different takes on this, so I decided to leave both articles intact.
Over the past few years, Charles Schwab has taken several actions that seemed to indicate that they were no longer interested in the Independent Advisor. Selling US Trust, canceling their referral program and other actions.This is not just me talking either, I know more than a few Schwab advisors that feel the same way. I thought sometime soon, Charles Schwab would spin off the advisory part of their business. Again, they never really said this directly it’s just their actions. Considering this:
…Schwab announced January 11 that it’s affiliated advisors now custody more than $500 billion at Schwab Institutional…
I don’t see how they could do it so maybe I’m being paranoid. However, it’s not just me that’s feeling this way; it’s advisors that currently use Charles Schwab.
If it’s not their intent to get rid of the RIA business, they really need to talk with their advisors and figure out what the problem is. Almost every advisor I know that uses Charles Schwab is looking at alternative clearing firms.
Not to long ago Matt posted, that some of the actions by Charles Schwab may actually be good for the independent advisor. But it seems to me that Charles Schwab is saying one thing and doing another. They say they want independent advisors but their actions don’t come into line with this. Maybe they just want the advisors with more than a billion under management.
Matt Abar said,
February 7, 2007 at 11:50 pm
I don’t think we see this issue differently. I think Schwab is, at best, sending conflicting signals to their RIAs. The conflict stems from a struggle at the executive level about whether they want to manage all accounts directly, or whether they’ll farm out the client relationship and accept a smaller cut of the profits.
Schwab Institutional does a great job with advisors when they’re not stepped on by the executives. That being said, I think they’re much more interested in the >$1 billion RIAs, but who wouldn’t be?
Conflicting signals aside, I think “loans for breakaway brokers” is a great marketing idea. Schwab positions themselves as *the* custodian for those high-end brokers with the potential to grow into the $1 billion firms Schwab wants as clients. At the cost of some relatively low-risk loans.