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Schwab drops pretense: $2-million clients its staple branch diet in bid for fresh $2 trillion

The San Francisco-based broker has named its composite perfect ideal client 'Tobin' -- representing a graying, masculine entreprenuer

Author Kelly O'Mara November 5, 2013 at 6:07 AM
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Andy Gill: We believe we'll continue to attract affluent clients at an accelerated pace.

RIA Custodians

Tad Borek

Tad Borek

November 5, 2013 — 8:22 PM

And in other news, McDonalds has expanded its McCafe coffee offering in the hope of drawing high-margin customers from Peet’s and Blue Bottle. =)

I do think the gaping hole in the marketplace is a competent mass-market RIA. But IMO it shouldn’t have this built-in fundamental conflict of interest, it needs to commit to the RIA side of the aisle. Not talking so much about the conflict with RIAs who are using them as custodian – which certainly exists (it was years ago but I recall their reps soliciting clients when they made deposits at the branch, something that has never happened in 10 years w/Fido). That’s a minor conflict because of the bigger elephant in the room that renders them less competitive:

This is a publicly traded company with significant revenue from trading volume, interest rate spreads earned on money-market and margin assets, NSF-fund shelving fees, AUM fees on in-house funds, etc. This is the stuff truly independent RIAs weigh into the calculus of investment selection & strategy. A Schwab advisor sits in the same office building as her B/D-RR counterpart and recommends investments/strategy for an RIA client, with choices that could work to the detriment of the other side of the building. Classic principal-agent problem right? It’s not unresolvable, but it’s complicated. IMO you either stick to your knitting or change up the model entirely. The first discount B/D to do that would be the real innovator.

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