Schwab will continue to focus on its custody services for registered investment advisors with under $100 million AUM, President and CEO Rick Wurster told an audience of advisors at Schwab Impact, the Westlake, Texas-based firm’s event for RIAs.
Wurster’s comments come after Fidelity Investments, the second-largest custodian after Schwab, told RIAs in early October that firms with under $100 million in client assets will have to leave the platform by June 30, 2027.
“Our job is not to tell you what you should become, how big you should be or what success looks like for you,” Wurster said Wednesday morning during the event’s opening remarks in Boston. “Our job and our role is to provide a platform and a support ecosystem that helps you support your clients and helps your firm thrive.”
Schwab and other custodians are seeking to capitalize on Fidelity’s move by appealing to advisors who may be looking for a new custodian.
Wurster also addressed two other areas that have made headlines in the trade press regarding Schwab’s custody business.
First, he discussed his decision, with Head of Advisor Services Jon Beatty, to offer long-short tax investment strategies to RIAs, which were quickly oversubscribed and posed a risk due to the complexity of the offerings.
That led the firm to limit long-short offerings only to clients with at least $10 million in assets, curtailing their use by many advisors.
In response, Wurster said the firm was “working with third-party providers” about expanding options, while also developing a proprietary offering he had alluded to on an Oct. 15 earnings call.
The CEO said there would be updates “some time soon,” but gave no further details.
The second area he addressed was reducing the Schwab Advisor Network referral network by raising the bar for participation to only clients with over $5 million and RIAs with at least $500 million in AUM.
Wurster said the program has 100 participating firms out of the 17,000 custodying with Schwab. He said SAN has moved upmarket, with 50% of referrals in the $10 million-in-assets client segment.
“We will continue to invest in SAN as an important part of how we connect our wealthiest clients with specialized advice and independent fiduciary guidance,” Wurster said.
In the meantime, he said retail clients “below $5 million” are “well served by the Schwab network.”
“Both are critical to serving our retail clients,” he said, adding that if an advisor found Schwab competing with his or her RIA in the market, they should contact him.
“I’ve only gotten one email about such an issue, and it was resolved quickly,” Wurster said.
During a Q&A session with advisors, Wurster was asked why the firm was opening up so many brick-and-mortar branches if it was not competing with advisors.
Wurster said that the 400 branches Schwab had in 20 cities were to serve Schwab retail clients seeking advice, and said they “do not go out into the local market looking for new wealth business.”
“We’ve got 30 million-ish retail accounts with close to $7 trillion in retail assets looking for advice,” Wurster said. “We want to service those clients.”
In a letter published in financial media ahead of the conference, Schwab noted that it has some 3,000 financial advisors in-house, many of whom hold CFPs.
Later in the conversation, an audience member asked about the advertisements Schwab runs with a broker called “Carl,” who gets stumped by Schwab’s investing and advice offerings.
“Carl is meant to represent a compromised broker from a full-service wirehouse firm,” Wurster said. “We hope it allows you to tee up a conversation about how you’re different and why what you do and how you act as a fiduciary put the clients in the best place possible to live their financial dreams.”
Beatty also said the firm would be bringing a business banking option to its network in the first quarter of next year.
“We understand the need for a business banking checking account that comes to you,” Beatty said. “I’m glad to be able to announce to you here that we’ll have that for you next year.”