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The news was stunning.
In a press release dated July 10, 2023, Schwab announced that “retail clients with more than $1M in assets at Schwab will be automatically enrolled in Schwab Private Client Services...”
Retail clients with over $10 million in assets held at Schwab will be enrolled in Schwab Private Wealth Services.
The benefits were described in the release as follows:
As part of these new experiences, all HNW and UHNW clients have access to a dedicated Schwab consultant who is responsible for their overall relationship with Schwab at no additional cost to them. This consultant can help clients manage their financial life, help them choose the right level of advice or services they need, create a personalized financial plan, and connect them to a range of Schwab’s wealth management specialists.
The services of the “specialists” will be fee based.
Should you be concerned? How can you compete with “free”?
Traffic cop or advisor?
I contacted Schwab’s media relations department and told them I was writing an article for Advisor Perspectives on its new service. I requested an interview with someone who could discuss the new offering.
Despite many e-mail exchanges, I was told Schwab didn’t “have anyone available for an interview.”
I received written responses from Michael Cianfrocca, my media contact at Schwab. He advised me that:
- The new services aren’t advisory.
- The dedicated financial consultant will primarily connect clients to different resources at Schwab, which are not free.
- While some financial consultants are CFPs, their “primary role” is acting as a concierge and directing clients to Schwab's relevant services.
- The financial consultants are not fiduciaries.
In response to a series of my follow-up inquiries, he said financial consultants “can also provide financial planning,” although they would frequently bring in specialists based on client needs.
While a financial consultant can create a free financial plan, my understanding is that they won’t provide investment advice.
Threat or non-event?
On a positive note, it wouldn’t make sense for Schwab to offer a free service that cannibalizes its Wealth Advisory business.
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I see the new service as more of a talking point to maintain its retail clients and promote its other services to existing and new clients in the guise (but not the reality) of offering “free” advice.
What’s next?
Fidelity and Vanguard will likely respond with a competitive offer.
A delicate balancing act
Schwab is walking a tight line. It doesn’t want to alienate advisors but is highly motivated to increase revenues for its other services, which include:
- Investment planning;
- Tax planning;
- Estate planning;
- Retirement planning;
- Risk management and insurance;
- Banking and credit management; and
- Education and family support.
These are precisely the services you offer to your HNW prospects and clients. You now have a formidable competitor.
Once these custodians and fund families entered the advisory business in direct competition with independent advisory firms, it was just a matter of time before they used their leverage and the benefits of vertical integration to dominate this space.
This isn’t the last step in this process.
Dan trains executives and employees in the lessons based on the research in his latest book, Ask: How to Relate to Anyone. His digital marketing firm makes extensive use of artificial intelligence to help advisors increase their SEO rankings and improve their marketing and helps advisors integrate AI into their practices.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
