Schwab Head Optimistic about Poaching from Wirehouses

Bernie Clark, head of Charles Schwab Advisor Services, expects to continue gain more assets from the wirehouse channel, he said at an event today in New York City.
While traditionally assets move from wirehouse to wirehouse, Clark said more assets are flowing into the independent space (including independent broker/dealers and registered investment advisers). “I do believe it’s not a wave; it’s something that will show consistent movement over time,” he said.

Schwab’s semiannual Independent Advisor Outlook Study, released today, found that 46% of RIAs’ new clients came from full-service wirehouse firms. Surveyed independent advisers reported that clients are leaving wirehouse firms because of lost of trust in their previous firms (65%), followed closely by a desire for more personalized advice (59%).

While custodians such as Schwab have reported an uptick in the number of assets gained from wirehouse firms, industry data show that only a small slice of wirehouse advisers choose to “break away” to the independent channel (see “How Many Brokers Really Went Independent in 2009?”).

Overall, the overwhelming majority of advisers surveyed by Schwab reported gaining new assets in the next six months, with 76% coming from other firms. Schwab remains the largest custodian for independent advisers, with $590 billion under assets as of December 31.

As for retirement plans, Clark said Schwab will continue to leverage any opportunity in the retirement plan arena (about 20% of Schwab advisers work with retirement plans). He told PLANADVISER that Schwab Advisor Services is working more closely with its institutional side; for example, this year Schwab is combining its IMPACT conference for advisers and its ADVANTAGE conference for third-party administrator (TPA) conference.

More Saving

Schwab’s survey found that 32% of advisers think “frugal spending habits” will stick post-recession, followed by “focus on saving money” (26%). However, a majority of advisers (55%) want American consumers to save 9% of their personal income, which is more than the current national savings rate of 4.8%.

Almost two-thirds (62%) of surveyed advisers reported that their own clients are more focused on paying off debt in the current environment. Another deterrent to saving: the need to take care of children. While only 14% of advisers said their clients are doing more to support their parents in this market environment, a startling 44% said clients are doing more to support their children.

Many advisers (57%) reported that it will be difficult to achieve their clients’ investment goals in the current market environment. However, that is much more optimistic than last year, when 84% felt that way. Advisers have also been able to do less hand-holding; one-third said clients needed reassurance during the last six months, compared to almost half in January 2009.

Clark noted that although advisers might need less assurance, clients are still hungry for more education. “We know from this study that advisers have spent considerable time over the past year communicating with their clients,” Clark said in a release of the survey results. “But while many advisers that we work with say that they are in more of a ‘back to business’ mode, there is clearly a continuing need for advisers to play a role as educators for their clients.”

In January, Koski Research conducted an online survey of more than 1,100 independent investment advisers who custody with Charles Schwab.