Schwab just announced another stock plan-related deal after helping OpenArc launch $129-billion stock plan RIA, an 'impactful funnel,' Cerulli analyst says
The $11-trillion brokerage will fund and also use Qapita to 'power' stock plan management inside private companies -- complementing its biggest-ever breakaway from Merrill Lynch, which is focused on public company plans
5 min read
Brooke's Note: Under new CEO Rick Wurster, Schwab seems to be opening up its playbook and flexing its power – and imagination. With a second play at stock plans in the past three weeks, Schwab is making strategic advances in ways that are relatively bootstrapped for a large corporation. The name of the game, of course, is to get wealthy investors and their assets – even if in the form of private stock and options – while they are young in niches where smaller brokerages are harder-pressed to compete. Schwab's partnering with OpenArc gives it a way to manage that wealth at a high level in S&P 500 companies. Qapita gives it value proposition for staff at high-flying private companies, like SpaceX, Stripe and OpenAI – some of which seem destined for the S&P 500.
In a bookend to helping launch $129-billion Merrill breakaway RIA OpenArc, Charles Schwab can now manage equity programs for private companies the way it does public companies.
The $11-trillion, Westlake, Texas, brokerage is leading a $26.5 million B round into Qapita, then simultaneously using the Singapore startup's services to “power” the new service, Schwab Private Issuer Equity Services.
Schwab will use Qapita technology to manage the pre-IPO shares, options and other stock plan aspects and give it “wealth management support.” Some of that wealth management support could come from OpenArc.
Schwab announced it was instrumental in launching and provisioning OpenArc which had about $129 billion of managed assets as of Dec 31, 2024, while under Merrill Lynch – largely from stock plans, including c-suite executives.
The team broke away from Merrill Lynch where it went by the name, Global Corporate & Institutional Advisory Services, or GCIAS. It's one of the leading managers of assets inside corporate stock plans. See: Charles Schwab and Dynasty pull off record-shattering -- and previously unthinkable -- lift-out of $129-billion AUA Merrill Lynch team, but the thundering herd has furiously stampeded to court to block the move
Win-win
Ravi Ravulaparthi, founder and CEO of Qapita explained why getting Schwab as a partner and an investor is a two-for.
Charles Schwab and Dynasty pull off record-shattering -- and previously unthinkable -- lift-out of $129-billion AUA Merrill Lynch team, but the thundering herd has furiously stampeded to court to block the move
"Entering the U.S. with both a significant investment from Charles Schwab and a strategic product collaboration is a win-win, giving their clients access to best-in-class private equity management software that will support a seamless transition to a public company.”
He adds in a release: “Our modern, configurable platform is designed to meet the needs of companies throughout their growth journey, and together with Schwab, we will be providing a robust alternative in a growing market that currently has limited flexible and scalable options."
Strong alignment
OpenArc hinted strongly at a plan to cross-refer with Schwab to build a mutual national presence in stock plans.
The Schwab move into private company administration dovetails nicely with OpenArc, says Shirl Penney, CEO of Dynasty Financial Partners.
Dynasty and Schwab both helped OpenArc break away. Dynasty owns a minority stake in OpenArc and Schwab owns a minority stake in Dynasty.
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“This is very helpful and strategic to the work that OpenArc and Dynasty are doing because it further expands Schwab’s corporate platform to work with more companies including working with companies sooner in their lifecycle when still private and then transitioning with them as they become public,” he adds.
“Expansion of admin capability to reach more corporate clients aligns quite well from a capabilities and philosophical standpoint with Dynasty, which is in part why we are enjoying such a great partnership.”
The Schwab move into stock administration makes perfect sense – and can move the needle, according to Scott Smith, senior researcher with Cerull Associates.
“Stock administration is one of the growth funnels that is going to be so impactful,” he says in an in-person RIABiz interview in Boston.
“When you have 26 year-olds getting stock options, they don't know what to do with them. And once somebody finds a provider they connect with, we don't see a ton of attrition."
Bigger U.S. footprint
Chicago alts consultant Seth Stuart says Schwab is also being strategic with its partnership and investment with Qapita.
"Schwab is also ‘blocking’ other direct access by being the lead investor within Qapita's Series B round," he says.
“This will allow Schwab to better compete against the likes of Morgan Stanley as well as Robinhood, especially for clients and firms that need and want these services and participate in early-stage companies.”
Qapita with, $80 million in funding, has a headcount of 300 employees. It has a minimal following in the United States, but serves 2,700 companies, mostlyl based in India (70%) and Southeast Asia (20%), TechCrunch writes.
It will compete with Carta, Pulley, or Morgan Stanley’s Shareworks, the article states.
Schwab is expected to vastly bolster its US presence, according to Andrew Salesky, managing director, Schwab Stock Plan Services.
“By combining Schwab’s world-class service and Qapita’s flexible technology, we’re helping companies deliver stock plan experiences that support their growth journey and empower and reward the people who make that growth possible.”
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