Defiant Schwab says RIAs have welcomed $2M referral minimum

Schwab executives say it will help RIAs target their ideal clientele, but competing custodians like Altruist argue the move ultimately ‘helps Schwab in its long-term effort to displace independent advisors.’

Executives from Schwab Advisor Services defended its fee hike and increased asset minimum requirement for RIAs using its client referral program, suggesting its asset increase to $2 million allows advisors to give more focus to their preferred larger clients.

“We raised the fee share between us and the advisor by 5% for the first time in 20 years. I think we’re still behind the inflation curve on that one. The minimum was $500,000, that’s where we launched it 20 years ago. Again, we’re behind the curve on the inflationary effect,” Jon Beatty, pictured, head of Advisor Services, said Thursday at the Schwab Impact conference in Denver. “Most advisory firms have a $1 million, even a $2 or $3 million minimum. In a lot of ways, they were doing us a favor in serving these smaller households so we right size that in the marketplace,” added Beatty. 

Schwab’s client referral program, called Schwab Advisor Network (SAN), announced its 5% fee increase for participating RIAs in February. The company is also upping the minimum in required assets per client to $2 million from $500,000, shrinking the pool of clients for advisors to work with. That new minimum is set to go into effect in January 2026.

“Many of them were actually thankful it allowed them to focus on the ideal clients that they like to focus on,” Brad Losson, Schwab’s head of enterprise solutions, said on SAN’s asset minimum increase. “It hasn’t really changed our relationship with any advisor participating in the program, so it kind of went over almost as a non issue to a positive for those that participate.”

About 140 RIA participated in Schwab’s referral program as of the first quarter of this year. Among those firms is the California-based RIA Halbert Hargrove, which manages about $3.5 billion in assets and participates in Fidelity’s WAS referral program in addition to Schwab’s SAN.

“The increase in client asset minimums is a positive for our firm. It aligns us with clients who we believe are a better fit for our business, and the higher minimums are better suited to the types of services and offerings we provide our clients,” Kelli Kiemle, managing director of growth and client experience at Halbert Hargrove, said in a statement to InvestmentNews.

By raising asset minimums on its RIA client referral program, Schwab can effectively expand its in-house investment services to clients under $2 million. 

“We have about 70% coverage of our million dollar plus clients in our retail channel over the years that has actually slipped to a place of uncomfortableness for us. And so this is actually an investment to get back to where we used to be in terms of our coverage,” Beatty said Thursday.

Earlier this year, Schwab planned outreach to investors who hold both $1 million or more in a Schwab retail account and have separate assets in Schwab’s RIA custody channel. The outreach, intended to promote Schwab’s in-house wealth services, was canceled in July after advisors shared concerns of Schwab overstepping into clients of the RIAs it serves.

“The SAN program is an essential offer within our solutions to retail investors who want help and advice in a delegative and a fee-based manner,” Beatty said. “It has been a cornerstone of our managed investing solutions in our retail channel, and we believe that will continue. The moves that we’ve made more recently have really been to modernize the program.”

Jason Wenk, CEO of Altruist, a competting tech-forward custodian, was more skeptical of Schwab’s motives in raising its client minimum for referrals to RIAs. “I’m just kind of surprised that more advisors aren’t scratching their heads and going, I’m sort of inviting the Trojan horse on in and helping them in their long term effort to displace independent advisors,” Wenk told InvestmentNews.

“If they [Schwab] went from $500,000 to $2 million, it’s probably only a matter of time before they go from $2 million to $5 million. At some point it’ll be a very small percentage that they’ll refer out. Who knows, maybe someday they’ll just buy one of the really big RIAs,” Wenk added. 

“Advisors have to then make choices, this is your custodian competing with you. And they have way better economics than you do, because they both own the custodian and they’re acting as the wealth managers,” said Wenk. “If I plan on being in this business for another 20 years or longer, I’m not sure I want my client assets and the revenue I generate for my custodian to end up feeding the R&D of a competing wealth management business that’s going to try to go directly to my customers.”