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

Immediately, as I neared, I could see customers – all with a surreal aura of affluence – lined up outside. I could also see the backs of other customers literally pressed against the glass doors as I got closer. Though I'm not a First Republic customer, I joined the line just to take it all in. Light banter of a dark variety was exchanged. 

Most people seemed to be madly texting on their phones or talking to their spouses about their progress executing the grim errand. Everyone I spoke to was pulling all their cash. 

I felt like I'd been in this line before. It was similar to being with a bunch of fellow airline travelers in a United Airlines line after hearing that your flight had been canceled – recoverable circumstances but unbudgeted time and aggravation. 

The exchanges with First Republic staff inside appeared mostly good-natured. As people popped out, they held bakery cookies in their hands – a famous FRB perk. They all reported no problem getting their cash and some had grabbed extra cookies. One woman said she was moving her money to Chase Manhattan. 

One man said he worked in downtown San Francisco and had traveled out to this suburban branch because the city branch was more mobbed. He realized it would probably all be okay when he found a parking spot near the front of the strip mall branch. 

Having had my fill, I drove north to deposit my check at Schwab. As my Schwab service rep was helping me, I told him I'd just come from First Republic. He said he'd been taking in one First Republic check after another and that it had actually slowed recently before picking up again. 

By the time I got back to my office and looked at Yahoo, I saw a fresh, anonymously sourced Reuters article reporting that First Republic was in line for receivership with the FDIC “imminently.” Shares had fallen an additional 47% after hours to $1.86.

Thank God it's Friday.

Schwab launches another (small) lay-off round to cut TD Ameritrade redundancy

Charles Schwab Corp. let go of another 80 staff in lay-offs linked to its acquisition of TD Ameritrade (TDA)

The Westlake, Texas RIA custody giant has now let go just shy of 1,300 employees, or 3.5% of its total workforce, all tied to its final systems merger with TDA, according to Ignites. See: Charles Schwab Corp. boasts 99.9% success with (likely) mock conversion of TD Ameritrade data.

“[J]ob actions are part of our multi-year integration roadmap to reduce overlapping or redundant roles across the Schwab and TDA broker-dealers,” a Schwab spokesperson told the trade paper.

“These actions are in no way connected to current events in the financial sector,” the spokesperson added.

Schwab, which has $7.58 trillion under its management and employs roughly 35,000 staff, has yet to respond to a request for comment. But a source with some knowledge of the matter describes the layoffs as “pruning.”

Schwab declined to reveal where its latest axe fell, beyond stating laid off employees worked in a "small number of teams."

TDA's website and its trading service, Thinkorswim, also suffered roughly an hour-and-a-half of service outages during the morning (Eastern) April 14.

A penny passed along to investors is a penny earned for Schwab

Charles Schwab & Co. is also likely to save millions of pennies, after scrapping a long-standing client perk for RIAs and advisors. It will mark the change with a virtual asterisk next to its zero-fee trading to denote investors are paying a fee to FINRA.

The Westlake, Texas brokerage and RIA custodian is already counting pennies after interest rate reversals at its bank promised to knock billions off its long-term earnings and sent its shares into a tailspin. See: Schwab assures it has financial muscle to shrug off billions of dollars in unrealized bank losses.

Now, as a result of a policy change enacted three days after Silicon Valley Bank bit the dust, Schwab will save a minimum of $220,000, but likely millions* of dollars a year, after passing FINRA's trading activity fee (TAF) to its clients.

Brokerages pay one of FINRA's three major sources of revenue  monthly, based on self-reported trading data. Schwab previously paid  the TAF on behalf of RIA and retail traders.

TAF amounts to a flat rate of $0.000145 per share on sales of equities and $0.00244 per contract on sales of options.

Rival custodians and clearing houses Apex, Altruist, and Interactive Brokers confirmed they pass-on TAF costs through offset fees.

"It's a de minimis amount and negligible to most investors," says Mazi Bahadori, chief compliance officer and executive vice president of operations for Culver City, Calif., custodian, Altruist, via email.

Fidelity Investments and Pershing have yet to confirm whether they also pass on TAF costs to clients.

Schwab did not respond to a request for comment, or provide the reason it will now levy TAF offset fees.

***

* Investors make roughly six million trades per day through Schwab, so with a posited minimum trade volume of one share per trade and the application of the $0.000145 TAF minimum over the average 252 US trading days per year, Schwab's likely minimum annual TAF fees come in at a base: $219,240.

In fact, the sum, theoretically, could come in lower, given fractional trading; or more likely, it could come in far higher, given the likelihood of a vastly higher trading volume than one share per trade made through Schwab accounts.

Gary Gensler pleas for funds to fuel SEC hiring spree

Gary Gensler just asked Washington for a 10% budget increase to fund 170 new  hires -- mostly in enforcement at the Securities and Exchange Commission (SEC).

The SEC chair said the regulator needed fresh funds and more staff to deal with the "Wild West" of the cryptocurrency market, as well as 22% growth in the number of RIAs the SEC monitors.

As a further reason to expand staff, Gensler noted that the SEC is dealing with twice as many whistleblowers today, as it did in 2016, when its headcount was 5% higher.

The Consolidated Appropriations Act of 2023 already increases the regulator's budget for 2023 by $210 million, a 10% year-over-year increase.

The SEC is also planning to increase the number of in-person visits to RIAs, Natasha Greiner, deputy director of the regulator's division of examinations, said in a March statement.

The SEC broadened its ability in 2022 to pay whistleblowers to come forward.

Johnson Family Office pick retires from Fidelity private equity unit

Brooke's Note: I did a double-take as I saw the name Lane MacDonald. He was the source of much hockey heartache for my brother and me – both Boston University fans –  when we saw the BU Terriers play Harvard. He was a magical skater and almost seemed he could score at will. It's nice to see he had a great career in investments.

Fidelity parent FMR just appointed Suzanne Streeter as the new president and chief investment officer of its private equity unit, Devonshire Investors.

The Boston holding company for RIA custody giant Fidelity Investments hired Streeter this April, after the company, Apr. 10, confirmed the early retirement of her predecessor, hockey hall-of-famer Lane MacDonald, 57.

Devonshire, also known as FMR Diversified Investments, manages FMR's non-financial services investments. It does not sell products through Fidelity Investments. See: The mission-critical task Abby Johnson once entrusted to Mike Durbin regarding Fidelity's RIAs and automation.

Prior to joining Devonshire, Streeter spent seven-and-a-half-years working at the Boston and New York City offices of outsourced chief investment officer vendor, Partners Capital, where she served as a partner and co-chief investment officer.

MacDonald, a 1988 US ice hockey Olympian, has long-standing ties to the Johnson Family, Fidelity's majority shareholders. He joined the Johnson family office, Crosby Advisors, as its president in Feb. 2014, after six years at the Harvard Management Company.

MacDonald moved to Fidelity proper in Oct. 2015. He also spent time as a director on the board of Fidelity-backed venture capital shop F-Prime.

A Wisconsin native, McDonald played collegiate hockey at Harvard and led the Crimson to the 1989 National Championship as captain. MacDonald capped his 1989 season by winning college hockey's top individual honor, the Hobey Baker Memorial Award.

A third round draft pick of the Calgary Flames, he later played for the Hartford Whalers, before he was forced to give up hockey due to recurring head injuries.

Chicago-to-Omaha-to-Chicago return trip for Chase

A former Orion and Envestnet executive is also proving the adage that sometimes you have to move elsewhere to move up.

Libby Chase just flip-flopped on her decision to trade a Chicago employer for one in Omaha, rejoining Envestnet after less than two years at Orion Advisor Solutions.

Chase, formerly Envestnet's senior vice president for enterprise consulting, left the outsourcer for its arch rival Orion in June 2021, becoming its senior vice president for strategic relationships.

Her two-year stint at Orion – she left in March – earned her a promotion. Chase's new title: head of client success and account management.

Robots and Cash Sifters

LPL Financial has dumped BlackRock-owned robo-advisor FutureAdvisor, weeks after the robo disgorged its retail advice business.

The Fort Mill, S.C., IBD and RIA custodian has replaced FutureAdvisor, which previously managed its Guided Wealth Portfolios (GWP), with its own service, according to the firm.

“This change has been in the works for multiple years. LPL wanted to create a better experience for advisors by bringing this functionality in-house," says a company spokesperson, via email.

"This move is also part of a larger strategy to provide more investor-driven capabilities across all advisory programs via LPL’s investor portal, Account View. GWP portfolios are now monitored for trading and rebalancing activities by LPL’s Overlay Portfolio Management Group.”

LPL has yet to answer whether it is using an outsourcer to run its robot's software, or if it has built its own.