RIABiz's five top articles of 2025: Schwab goes 'discretionary' on wealth • Schwab plans to keep or self-refer all sub-$2-million accounts • Fidelity flexes its 401(k) edge • Vanguard sheds nice-guy culture with internal pitting • RIA's lawyer kills Merrill's TRO attempt on $129-billion breakaway
RIAs quickly grasp when a move by Fidelity, Schwab or Vanguard could have an impact that shifts the ecosystem for better or worse.
8 min read
Brooke's Note: It's as important to note stories that didn't feature in our Top Five for 2025 as it is for the ones that did. You won't see broker-dealers, artificial intelligence, mergers and acquisitions or anything remotely relating to interest rates, market gains, or tariffs. It was all related to RIAs or their closest cousin – the Big Business of Fiduciary Asset and Wealth Management. In fact, four of the five centered on telling actions by Fidelity, Schwab and Vanguard. Much also got made of Schwab's allocation of referrals away from RIAs to itself. In my opinion, the juice in this story was less about referrals lost by RIAs, than it was about an uh-oh meta-shift by Schwab to go all-out as an RIA itself and compete with new companies like FINNY and SmartAsset, which produce plenty of fat leads at attainable rates. Our No. 5 story was about the unprecedented lawsuit between a $129-billion RIA – backed by Dynasty, Schwab, and crack lawyers – and Merrill Lynch. For now, the RIA holds a 1-0 lead in legal contests decided by a judge.
Vanguard Group exudes a touch of a socialistic vibe because it is owned by its shareholders who reap any capitalistic profits in the form of lower fees.
But the Malvern giant keeps proving mutual ownership doesn't mean that it fight to win in the fierce capitalistic arena of finance.
Our No. 1 story of the year bore that out when we wrote about a little-noticed “corporate statement” on its website – it disclosed a radical restructuring.
Vanguard asset managers were split into two teams.
The exact reason it got done was insider baseball. More teams offered more spots for leaders and freed up more positions higher up the personnel food-chain, according to Cecile Munoz, CEO of U.S. Executive Search & Consulting in Los Angeles, Calif.
It "allows for their culture of exceptional talent retention, and cures the paradox of equally creating growth for the next generation," Munoz says, in an email exchange.
But it's also a cure for the downsides of centralized decision-making.
“The evolution of Vanguard from a monolithic structure to one which addresses various growth issues; structure, risk management and human capital is absolutely right,” she adds.
Jeff DeMaso, editor and publisher of the Independent Vanguard Adviser, applauded the move but offered one caveat: that “the real challenge [is] can Vanguard maintain two world-class indexing teams while keeping costs low."
Our No. 2 story was one small tweak for Charles Schwab & Co. and one giant confirmaton of an inevitability RIAs expected all along from the No. 1 RIA custodian.
Schwab CEO Rick Wurster broke the news of a “discretionary version” of Schwab Wealth Advisory – the in-house RIA – in the executive summary of Schwab advancements from a conference call with Wall Street analysts on Thursday (July 17).
“In our wealth business, we continue to invest in Schwab Wealth Advisory,” he said. “We launched a discretionary version of our full-service wealth management capability, an important step in meeting the holistic needs of our clients.”
SmartAsset raises $110 million after LPL and Schwab dominoes fall, revenues zoom to $100 million and Zoe escalates RIA referrals arms race
Previously RIA clients had to sign off on every buy, sell and rebalance in a portfolio managed by a Schwab wealth manager.
Schwab Wealth Advisory finished 2024 at about $179 billion.
The Schwab move was a good one for competing better with its two rivals, said Scott Smith, a senior wealth analyst at Cerulli.
“This is a necessary step to optimize client experience – many clients prefer their advisors take these actions without having to be consulted,” he says. “Both Fidelity and Vanguard operate the vast majority of their fee-based advisory accounts this way."
One takeaway from experts: RIA referrals were likely to diminish as discretionary management became the last clear delineation with Schwab's in-house wealth service.
Our No. 3 story confirmed fears about our No. 2 story.
Schwab change policy such that it would no longer refer most eligible investor accounts to RIAs. Instead, the Westlake, Texas, brokerage will now self-refer all $2-million-or-less accounts to its own in-house branch consultants and wealth managers – a 300% jump from the current $500,000 minimum cut-off.
Story Timeline
The Schwab Advisor Network (SAN) leap in mimimum “could be a category killer for a majority of those SAN firms,” says Tim Welsh, president of Nexus Strategy and former Schwab Advisor Services executive in an email.
“Historically, the average Schwab referral was roughly in the $1-million to $2-million range, so they are fundamentally cutting flows by at least a factor of 50% or more.
“Ultimately they [Schwab] have a higher margin, if they can keep the business in-house,” he says.
“But retention and aggregation rates can greatly shift the math here. I am sure Schwab will watch that closely. Rick is incredibly sharp, and I’m sure all over this.”
One giant recipient of Schwab referrals acknowledged the movement of tectonic plates.
‘It will be a seismic shift," said Peter Mallouk, CEO of Creative Planning.
Fidelity piloted 'free-money' 401(k) matches for eight years before going live last year; now Schwab is 'bolting-on' a third-party gizmo and imitating its rival with the launch of its own program
In our No. 4 most-read story, Fidelity Investments used the scale of its 401(k) business and the opportunity presented by Washington lawmakers to unleash a clear winner to young investors – and get plan sponsors to fund the “free money.”
The Boston recordkeeping giant launched the feature, which lets employers bestow “401(k) matching funds” that in fact pay down student debt – looping in literally millions of young employees otherwise sidelined before the SECURE 2.0 Act allowed it.
Schwab announced its own program on April 29th in concert with Candidly, a 2016 startup.
What makes the program so easy to like is that it could boost everyone from Fidelity and Schwab into the U.S. retirement world, says Louis Harvey, president at Dalbar, a market research firm in Boston.
“From the business perspective, Fidelity adds value for employers that translates into profits. I expect student loan debt service will soon become a standard in the industry,” he tells RIABiz.
The federal SECURE 2.0 Act, a 2022 Biden administration law that expands on the original 2019 SECURE Act, makes the program possible. Among other things, the update expands automatic enrollment in retirement plans.
“This stands out as one of the best, most creative benefits,” says Annie Messer, member relations at Pension Resource Institute and Group Plan Systems.
A recent Vestwell report found that “74% of employees with student loans would stay longer at a job offering student loan repayment.”
Our No. 5 top story showed that threats of wild legal repercussions can't cow RIAs and that RIA lawyers can throw a punch, as well.
Merrill Lynch's 48-page demand to shut down a $129-billion breakaway startup RIA, OpenArc, looked daunting until defense counsel unleashed its blistering, 168-page retort.
It looked like game, set, match and later. it turned out to be. See: Schwab, Dynasty and Merrill Lynch breakaway team gain 'leverage' in coming arbitration after rebuffing Merrill's TRO attempt -- but Merrill is still calling it a 'raid' and conspiracy that it will prevail on
The $3-trillion wirehouse's claimed the mass exit by its Barron's No.1 team in Atlanta was no “breakaway,” but rather a “raid” against its business interests.
But OpenArc lead counsel Joseph Alonso fired off a searing response – setting up an unprecedented showdown over a temporary restraining order (TRO) in an Atlanta courtroom on Sept. 30.
“Merrill offers no credible, admissible evidence…” Alonso wrote in a TRO response.
“The sole ‘evidence provided in support of the motion for TRO is an affidavit from an interested manager that contains no single shred of actual admissible evidence, is solely based on speculation and innuendo, replete with statements like ’I believe' or ‘I understand’ and completely devoid of factual basis or first-hand knowledge.”
The defendants also charged Merrill had “unclean hands.”
“Not only did Merrill ‘set up’ defendants to attempt to terminate them, it also dragged their reputations through the mud via the press to unfairly compete,” the response stated.
Footnote: A federal judge dismissed the temporary restraining order requested in a lawsuit filed by Merrill Lynch.
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