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9 questions to ask Schwab execs when you buttonhole them in Boston at IMPACT 2015

$23 trillion of AUM is there for the taking -- but how exactly does Schwab propose help RIAs win that discovered bounty?

Friday, November 13, 2015 – 12:31 AM by Brooke Southall
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Bernie Clark kept his comments in a pep talk framework Tuesday.

Brooke’s Note: RIAs are saying that Walt Bettinger showed a worthy fire and feistiness in his 2015 Schwab IMPACT remarks, but that they left knowing little more about Schwab or its intentions than when they boarded the plane to Bean Town. They further report that Bernie Clark and Neesha Hathi actually surpassed their boss in supplying more smiles than revelations, though as party hosts their performance got no markdowns. Granted, as a client at a vendor conference much of what you do is read vendor body language. But wouldn’t it be nice if both style and substance were forthcoming? Still, RIAs (and journalists) need to bear a portion of the blame. Direct answers flow from direct questions and questions can be hard to form in the fog of the market warp of a 7,000-person conference lubricated by the usual vices. From back in the fog of San Francisco, we lend these questions — in ascending level of difficulty — to RIAs to elicit meaningful answers from the Schwab brass.

1. With $125 trillion of assets invested globally…

...what exactly is the significance of the $23 trillion of assets you cited as the “wow” number leading off Schwab IMPACT 2015? Can you put that in context? And what makes RIAs any more likely to gather those assets in 2016 than in 1996?

2. What is Schwab’s big play…

...on behalf of RIAs to tap that next $22 trillion and how do those efforts show a muscularity not present at competitors like Fidelity, Pershing and TD Ameritrade — never mind the known nimbleness at custodians like Trust Company of America or Shareholders Service Group Inc.?

3. On a recent call with Wall Street analysts…

...Terri Kallsen spoke boldly of a plan to reignite the stagnant branch network by hiring thousands of advisors, training them and putting them in big cities that have the wealthiest clients. This effort will cost hundreds of millions in Schwab investment. Is there any way that RIAs can piggyback on these efforts — in terms of advisor training, for instance — and is there any prospect that a similar investment could be made on behalf of RIA considering the $23 trillion runway they have? See: Schwab’s big reveal at its July update: Goal to hire 1,800 financial advisors and unpause branch expansion.

Questions can be hard to form in the fog of the market warp of a 7,000-person conference. [Image by Bil Winterberg's FPPad.com]
Questions can be hard to form n the fog of the market warp of a 7,000-person conference. [Image by Bil Winterberg’s FPPad.com]

4. What do you say to cynics…

...who say that in fact RIA custody at Schwab has now been relegated to cash-cow status and that the cash thrown off will be invested in building a giant national Schwab-branded RIA that is robo, virtual and people-based in its conception? See: Schwab spills robo-beans to Wall Street, including a Schwab Bank wrinkle, cannibalization rates and the algorithm’s distaste for OneSource funds.

5. In that vein…

...Schwab’s RIA custody asset total slid straight sideways during the fiscal year ended Sept. 30 at right about $1.1 trillion — start and end. Is Schwab alarmed by this leveling off that doesn’t seem to have occurred at other custodians like TD Ameritrade? Is it upping its game on the service, technology or recruiting sides to ensure that momentum is regained? See: Both Schwab and TD Ameritrade smash breakaway recruiting marks from last year.

6. Is Schwab doing anything to alleviate the pain…

...of RIAs in dealing with giant cash balances in a low-interest rate environment? To some extent, it seems that Schwab is simply using this rate environment as a pretense for sweeping billions of RIA cash to Schwab Bank where it can be leveraged — with no benefit to the RIA client other than a miniscule savings rate. At what point will those balances swept to the bank be swept back to money market funds? See: For sub-$500k accounts, Schwab is sweeping RIA client cash into its bank, pumping up corporate profits.

7. Walt Bettinger called robos…

...the most hyped phenomenon in finance in the past 17 years, but at the same time Schwab invested tens of millions in rolling out 'Blue’ on TV, billboards and national magazines. Wasn’t this marketing blitz the biggest contribution to the hype and just where does this downplayed technology fit into Schwab’s efforts to grow its own franchise and that of RIAs? See: In a six-month-mark reality check, Walt Bettinger recasts Schwab’s retail robo-advice as a 'tool’ — but a handy one.

8. Will Schwab’s promised addition of mutual funds…

...to the robo simply add a layer of expense? Will Schwab mutual funds be included? See: Schwab grabs astounding $1.5 billion of robo assets in six weeks, but mostly from itself.

9. Schwab has shifted its approach…

...in dealing with the media from one of making its executives available to interviews to one of largely sheltering them from hard questions. This has come about on a curve that roughly follows its advance from discount brokerage to full service financial advice. Though journalists might leverage that either real or illusory channel conflict from time to time, wouldn’t an embrace of the journalistic process be in keeping with the broader goals of Schwab becoming a better, more transparent company? See: As Schwab edges closer to letting RIAs in as 401(k) middlemen, leaked details suggest to some that the firm still marginalizes the advisor.

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July 24, 2019 – 12:53 AM

Adam Smith

Adam Smith

November 13, 2015 — 9:13 PM

10. To what extent are profits generated from the Institutional side being used to bolster your activities on your retail side such as your ever expanding interest to build new wealth management centers?

11. Can you continue to honestly say that you continue to not be in competition given the scope of your retail offering these days ranging from Robo to sophisticated advice under your own Schwab Corporate RIA?

Stephen Winks

Stephen Winks

November 13, 2015 — 8:40 PM

Great journalistic inquiry . If this were done 50 years ago we would not have had 70 years of advisory services neglect..

Stephen Winks

Tom O'Brien

Tom O'Brien

November 13, 2015 — 3:43 PM

Q10: Does Schwab really believe that current workplace retirement plans have failed participants because they use TDFs instead of (much more expensive) managed accounts?

Walt Bettinger quoted from this article Schwab’s Bettinger: Tech, Retirement Plans, Disruption Are Keys to Growth


He said current model of workplace retirement plans has failed participants. The target-date fund is helpful, he said, but a “one-factor” model that isn’t suitable for all investors. Giving advisors the ability to give customized advice inside retirement plans with a managed account is the future of 401(k)s, he suggested.

“The current 401(k) system works for the employers, asset managers and record keepers, it works for everyone but the employee.”

There are enough enemies of the 401k system already. Does Schwab need to get onboard that train??

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