Schwab Foundation to promote RIA industry

Citing the increasing demand for financial planners and advisers, the Charles Schwab Foundation last week pledged $1.25 million in charitable contributions to two centers of financial planning education.

The charitable arm of The Charles Schwab Corp. in San Francisco will give $1 million to the division of personal financial planning at Texas Tech University in Lubbock, to be used for a teaching facility and to support a research scholar.

The foundation also has pledged $250,000 to the Center for Investment and Wealth Management at the Paul Merage School of Business at the University of California, Irvine. The money will be used to award two graduate student fellowships for the next five years.

Making the announcement at a panel discussion in New York on trends in the registered investment advisory industry, Charles Goldman, executive vice president of Schwab Institutional, cited a “significant” demand for qualified advisers in the industry. Schwab made the donations to the schools, he said, “so that they can educate a larger next generation of capable advisers.”

Nicholas Nicolette, president of the Financial Planning Association in Denver, noting that some firms will need to double or triple in size in the near future, said the industry doesn’t have an adequate supply of planners.

“The most common question I get when I travel around the country [is], "How do I find qualified people?’” said Mr. Nicolette, who is also a principal of Sparta, N.J.-based Sterling Financial Planning Inc.

Attracting and retaining new people is the “biggest problem in the industry,” agrees Deena Katz, associate professor at Texas Tech’s division of personal financial planning.

“I have more jobs than students,” said Ms. Katz, president of Coral Gables, Fla.-based Evensky & Katz Wealth Management, speaking after the panel session.

Wealth managers that serve rich clients are also looking for qualified people, said Evan Roth, founding partner of BBR Partners LLC in New York.

“I have to hire people with much more depth than in the past,” he said.

“For example, I recently hired people with a background in the aviation industry,” Mr. Roth said. “There will be some interesting career opportunities for accountants and attorneys who want to work in an asset-based fee setting.”

Mr. Goldman said he expects the “incredible growth” of registered investment advisers to continue, noting that the industry now manages $2.1 trillion and that the number of RIA firms grew by 33% between 2001 and 2006.

The growing popularity of the advisory model hasn’t gone unnoticed by large competitors, Mr. Roth noted.

“It has become more difficult to explain the difference between us as banks and wirehouses repeat our spiel,” he said. “You have to give them credit.”

Nonetheless, Mr. Roth said, he is confident that RIA growth will continue.

“Our growth spread virally through endorsements from our clients,” he said.

Mr. Nicolette thinks that an advisers’ fiduciary status will remain critical.

“The future lies in a simple question,” he said. “And that is, "Are you, my adviser, acting as a fiduciary, or are you not?’”

Charles Paikert can be reached at [email protected].