Schwab encourages RIAs to adopt client segmentation but some don't approve
The controversial practice is cherry picking to some advisors but experts say it's plenty fair and crucial for growth
Biz Briefs: The sorry scene at my local First Republic branch • Schwab launches new (smaller) lay-off round • Schwab hoovers pennies passing FINRA fee to clients • Gensler pleas for funds • Fidelity owner's private equity pres. retires • an Orion-Envestnet staff switcheroo • LPL dumps FutureAdvisor
Range Rovers screeched in and drivers joined a grim queue to get their cash, and cookie • The Schwab-TDA deal cull count now stands at roughly 3.5% of its staff • FMR's hockey star president has stepped down • SEC chief wants more enforcers • An Envestnet executive proves joining a rival is good business • LPL now has an in-house robot.
April 29, 2023 at 1:36 AM
Fidelity will hire 4,000 staff in first half -- a staggering number but a tapering off from 'unprecedented' rate in 2021-2022 that catapulted it to 68,000 employees
The $10.3 trillion giant explains its hiring -- in a layoff environment -- as an RIA-like goal, namely having the human bandwidth to develop 'lifetime' relationships with its 40 million investors
February 17, 2023 at 2:49 AM
Fidelity Investments loses Kathleen Murphy who largely caught up Fido to Schwab (near $4T) on the retail side by reversing net promoter scores
The 'no whining allowed' leader of the Boston giant's retail business, who oversaw $2 trillion in net new assets, was ready to exit but hung in through a year dominated by COVID-19 challenges
January 23, 2021 at 2:02 AM
Fidelity Institutional looks like a big TAMP after Mike Durbin removes last internal walls between products and advisors after 'meteoric' 2019 leap; two Fido RIA sales legends depart amid the shift
Rich Policastro and Tom Valverde are out after Fidelity Custody & Clearing assets leap to $2.6 trillion AUA, restructuring gets the credit -- and so restructuring gets extended.
March 13, 2020 at 10:36 PM
See more related moves
Elmer Rich III
The pushback to Schwab’s logical recommendations is a symptom — not the problem. The problem is the marketing problem of a lack of a steady flow of new pre-qualified prospects and referrals to help replace clients that are lost or retired.
Both sides are right. Schwab’s approach is sound. However, since most firms get new business haphazardly and have no effective business development or prospecting business practices in place, clients resigned may not be replaced.
Where Schwab and the firms have common ground is in establishing formal, on-going processes for business development. Addressing the problem and not just the symptoms.
Frederick Van Den Abbeel
Interesting article but I’m not surprised. They’re applying their competing retail branch metrics to their RIAs.
Schwab does the same on their RIA custody side providing enhanced services, special conference event invites, more resources to some RIAs and not for others (i.e. Call Center versus Dedicated Relationship Manager). On their retail side I believe not long ago a household was required to have a certain value to get some concessions, enhancements.
Makes me wonder how much they value each firm if certain services are for their defined ‘elite’ – might make it difficult for the less elite to grow their business simply because “those tools aren’t available for you” or “sorry, your not invited…”
This is rational vs. emotional question. Rationally, it is sound business practice to understand firm and client profitability and to focus on clients you can serve the best. For smaller advisory practices this often means one “segment” (per Laura’s point). For larger firms with more clients (and more diversity) segmentation makes complete business sense. The emotional story is different. Smaller clients (assets not height!) are often accomodation accounts or long time relationships that helped the advisor get started and cost very little to serve. Most advisors seem to equate segementation with “doing less or providing lower service” with small clients. In a relationship business it makes no sense (rationally or emotionally) to provide these clients “less”. But in true segmentation, less really isn’t the point. The first priority is understanding your firm’s economics and cost to serve. If it’s out of line then there may be a variety of root causes or solutions – including segmenting. True segmentation has multiple dimesions – value of relationship vs. cost to serve, future growth potential (lifetime value) and most importantly – client need. Segmentation may make sense if you have lots of clients, clients with different needs and if you believe your firm economics are out of line. As for growth… growth is great, but in a high touch business with 70% of your costs in people if your client level economics are out of line you will end up just exacerbating the profitability challenge when you grow (translation… hire lots more people). Lastly, as with any practice management advice, each practice is different so the merits of all this guidance depend on your situation. What makes sense for one advisor may not make sense for you. That’s what makes this fun!!