Schwab wants to give registered investment advisors equal or better access than their wirehouse counterparts to banking services such as lending, private market investing, and long-short investment strategies, CEO Rick Wurster said on the sidelines of the firm’s annual RIA conference, Schwab Impact.
Wurster cited the growing use of pledged-asset lending balances, the demand for long-short investment strategies, and the need to make private-market investing more accessible to the masses as focus areas for its custody offerings.
“If you put yourself in the shoes of the independent advisor, they’re competing against wirehouses that typically have really strong banks attached to their advice,” Wurster said. “We are increasingly trying to play a role of being their bank and helping them manage both sides of the balance sheet for their clients.”
Wurster sees pledged asset lines as a particularly fruitful growth area among RIAs, noting that clients have created “enormous wealth on paper” from stock positions that they don’t want to sell, but also have everyday liquidity needs.
“They have houses to buy, kids to put through college, a car to buy, and then want to have to sell their shares, and many of them are locked up, and so the pledged asset line has been a great way of creating liquidity for them,” Wurster said.
Currently, about 50% of 1,235 RIAs surveyed by Schwab offer pledged asset lines, according to the firm’s annual RIA survey released Thursday.
Another area of demand is long-short investment strategies that can help clients mitigate tax losses. Earlier this year, Schwab curtailed those offerings due to both high demand and the complexity of the strategies, making them available only for clients with at least $10 million in assets.
During Schwab Impact, Wurster told the audience of RIAs that the firm was working with third-party providers on options to expand its long-short offerings and was also developing its own proprietary offering.
Wurster said in the interview that a proprietary offering would likely include a minimum asset level but gave no further specifics on the amount or timing.
Schwab’s push to compete with the bank products or wirehouses also comes at a time when some larger wirehouse teams have been making the often complex move to the RIA sector.
Earlier this month, an advisory duo who managed about $18.6 billion in client assets at J.P. Morgan Advisors launched Latigo Peak Partners with custodians Schwab and BNY Pershing. Last year, a $129 billion advisor team left Bank of America’s Merrill Lynch to launch OpenArc Corporate Advisory, an RIA on the Dynasty Financial Network with custody at Schwab.
Wurster said “the pipeline is robust” for more advisors to move to the RIA space and other channels in the coming year.
“We’ve tried to make the path to independence as easy as possible,” Wurster said. “We’ve invested in our own process. We work with partners like we did with Open Arc. We work with Dynasty … collectively, we try to have a great experience ready for them, and try to make the transition easy once they decide they want to be independent.”
At least last year’s Schwab Impact, the firm also announced its acquisition of Forge Global, a private markets platform that allows investors access to popular non-public firms. Earlier this year, it sold off the trust division of that business to the IRA platform Alto, while keeping the private markets platform.
This year’s conference was dominated more by a new artificial intelligence tool the firm had developed with Anthropic, Claude for Financial Advisors.
Demos for that service were packed as advisors sought to see what the new service could do for them and whether it would be worth the cost, including an enterprise-level service that requires a minimum of 20 seats.
A standing-room only crowd surrounds Anthropic’s Jillian Altamura as she performs a demo of Claude for Financial Advisors at Schwab Impact.
Wurster said he sees AI use by advisors in the “early innings” and would not speculate on expectations for RIA uptake of the offering.
“Claude for financial advisors is about putting information in a synthesized way about clients at [an advisor’s] fingertips, while not allowing us to have control over the data and not allowing AI to train on that client data,” he said. “I think it offers the advisor a lot of ease, helps them with preparation, helps them generate insight.”
Wurster said the cost of using AI would be a factor for RIAs going forward, particularly as providers manage the high energy costs of running systems. He said, however, that the efficiencies gained by advisors could outweigh the costs.
Schwab’s CEO also addressed questions about whether the firm was competing with RIAs through its own Schwab Wealth Advisory division, which he highlighted during the firm’s third-quarter earnings call as an area of investment and growth.
In the interview, Wurster said Schwab’s own wealth offerings were targeted at the large retail client base within its ecosystem and were meant to attract clients to that channel, not through an external wealth client strategy.
“People typically join Schwab at a young age,” he said. “Then what we do is we give them incredible service, best platform in the industry, the opportunity to work with a financial consultant, and over many years we develop a level of trust that makes the relationship deep … at that point, that’s where we think it’s the right time to offer a wealth capability if the client wants it, and their life circumstances suggest it would be the right thing for them.”
Wurster noted that in about six years, he and Head of Advisor Services Jon Beatty have received only two emails from advisors complaining that Schwab had stolen a client.
The second one, he said, had just come during this Schwab Impact after he’d told advisors to reach out should they face a problem. He said it was from an advisor near a Schwab branch office and that he’d be calling them directly to “sort it out.”
“In five years, I’ve now gotten two emails,” he said. “We can live with that.”
In the meantime, Wurster had more work to do at Schwab Impact. Shortly after the interview, he was headed to play a round of pickleball with tennis celebrity Andre Agassi and two wealth advisors.
