Client Retention is Not a Barrier When Going Independent, According to “Sophomore Year” Advisors Who Custody with Schwab

  Client Retention is Not a Barrier When Going Independent, According to
  “Sophomore Year” Advisors Who Custody with Schwab

Schwab Advisor Service’s new RIA Economic Discovery Tool designed to help
advisors make informed decisions before moving to independence

Business Wire

SAN FRANCISCO -- April 9, 2013

While retaining clients remains one of the top three most important areas of
focus for advisors when making the move to the independent model, advisors who
have been independent for less than two years say the majority of clients
stick by their side once they make the switch, Schwab Advisor Services learned
from a series of recent interviews^1 with forty “sophomore year” independent
registered investment advisors (RIAs) who custody with the firm. Not only do
clients agree to transition with their advisors as they seek independence, but
most are immediately on board when told about the change.

According to industry research^2, the RIA industry has witnessed an eight
percent annual growth rate, more than doubling industry assets under
management, from $1.3 trillion to $2.8 trillion over the past 10 years.

“As one of the fastest growing segments of the financial services industry, it
is clear that the appetite for independent advice is expanding as more and
more advisors turn to the RIA space,” said Jon Beatty, senior vice president,
sales and relationship management with Schwab Advisor Services. “With industry
growth comes more choice for advisors as they seek out a path to independence.
Schwab works one-on-one with advisors to determine which solution is best for
them, evaluates the economics, and helps develop a transition plan tailored to
their needs.”

In the interviews, most advisors noted “the ability to provide more
personalized service to clients” as being a very or somewhat important aspect
in the decision to become an RIA, followed by “the preference to work for
yourself.” Also important was the need to “protect their personal reputations”
by moving to the independent model.

Supporting Advisors in the Move To Independence

Schwab helps advisors explore options for independence as they determine
whether it makes more sense to start a firm or join one. Schwab’s dedicated
Advisor Transition Services team then collaborates with the advisor to develop
a customized plan for their specific circumstances.

In its most recent effort to advance the understanding of the model’s
benefits, Schwab launched a campaign ─ “Don’t change your ways. Change your
world.”─ for advisors looking to move into the independent space, which
included the creation of new advisor videos and case studies that discuss the
entrepreneurial spirit that the independent channel embraces.

Schwab also launched a new RIA Economic Discovery Tool^3 that provides a
simple, at-a-glance hypothetical view of the financial benefits associated
with the RIA channel as compared to other advisory models. After selecting an
advisory model along with a few key estimates, advisors receive an in-depth
economic analysis of an RIA’s earning potential, income growth and firm value
over time, outlining what they stand to gain by switching to the independent

“We’ve found that the economic decision can often weigh heavily on an advisor
considering a transition,” noted Beatty. “With this tool and a conversation
with a Schwab business development officer, an advisor can get a better
picture of what the transition might mean to them.”

In addition to the RIA Economic Discovery Tool, Schwab has created a
comprehensive suite of resources to help support advisors considering a move
to independence, including access to industry-leading benchmarking research,
proprietary diagnostic tools, templates, and case studies drawn from years of
supporting RIAs.

Advisors “Own” Their Freedom

In every single case, the importance of entrepreneurship and the freedom of
choice that comes with the independent channel rang true among the “sophomore
year” RIAs interviewed. All of them said they would choose independence if
they had to make the decision again and nine out of ten said they are happier
now as an RIA and would recommend making the switch to their peers.

“In order to do the best job of offering advice for my clients, I realized
that I had to become an entrepreneur,” said Leo Arms, Owner, Thomas Leo
Advisory. “It’s very freeing to not have to answer to anybody other than your
clients because you know that all you want to do is do a good job for them.”
Here is more from Arms in this video.

Advisors interviewed also noted that it takes on average two years from the
time they first consider the idea to when the transition is initiated. And,
almost all agreed that the top benefits of going independent include the
ability to earn a larger annual income and the opportunity for greater
long-term personal financial success.

“It’s nice to see every new dollar that hits the bottom line and how it can
impact the value of our firm,” said Brian Power, Chief Operating Officer,
Gateway Advisory LLC. Here is more from Power in this video.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial
services, with more than 300offices and 8.8million client brokerage
accounts, 1.6million corporate retirement plan participants, 881,000banking
accounts, and $2.04 trillion in client assets as of February 28, 2013. Through
its operating subsidiaries, the company provides a full range of securities
brokerage, banking, money management and financial advisory services to
individual investors and independent investment advisors. Its broker-dealer
subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and
affiliates offer a complete range of investment services and products
including an extensive selection of mutual funds; financial planning and
investment advice; retirement plan and equity compensation plan services;
compliance and trade monitoring solutions; referrals to independent fee-based
investment advisors; and custodial, operational and trading support for
independent, fee-based investment advisors through Schwab Advisor Services.
Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing
Lender), provides banking and lending services and products. More information
is available at and (0413-2610)

^1 Koski Research conducted interviews between February 14 – March 6, 2013
with 40 independent advisors who became independent during the past two years
and custody with Schwab Advisor Services. Those interviewed have been working
in the investment advisory space for 15 years on average and manage a median
$100 million in assets.

Koski Research is not affiliated with Charles Schwab & Co., Inc.

Experiences shared are not a guarantee of future success and may not be
representative of your experience.

^2 Cerulli Associates, Charles Schwab Strategy estimates,

^3 The Economic Discovery Tool (Tool) is intended solely for use by investment
professionals. The Tool simulates the pro forma financial results of various
hypothetical scenarios for establishing, operating, joining and/or selling an
investment advisory practice or firm and compares those simulated outcomes to
various alternatives. The scenarios and alternatives covered are not
exhaustive and may not be representative of those you actually encounter. The
simulated pro forma results do not reflect, and are not guarantees of, actual
or future results. Your actual results may be materially different than those

Third party advisors are not affiliated with or employed by Charles Schwab &
Co. Inc. The mention of the firms is not, and should not be construed as a
recommendation, endorsement or sponsorship by Schwab.

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Charles Schwab
Anita Fox, 415-667-1308
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Sarah Gormley, 718-875-2122
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