Schwab gets some traction from fee waiver promotion

It didn’t take long for Allgen Financial Services Inc., a registered investment adviser, to seize on The Charles Schwab Corp.’s offer to waive electronic stock commissions through next June 30 and reimburse account transfer fees for any new-to-Schwab client that RIAs sign on by yearend.

“This can mean significant savings for you,” says a note that Orlando, Fla.-based Allgen posted on its website, and its Facebook and Twitter social networking site home pages. “This makes it a great opportunity to consider moving your account over to us since this offer will most likely only be available for a limited time.”

The offer was tempting enough to “push one prospect who was considering” moving money to the firm to set up an appointment for that purpose, said Jason Martin, one of Allgen’s three senior partners. “It definitely gives us a little bit of an edge with investors who don’t have an account with Schwab,” he said.

For the better part of a year, Mr. Martin added, the firm has prodded Schwab to move some of the massive marketing dollars it had been spending on its retail business into the institutional business for advisers.

Not everyone is as excited by the commission waiver as Allgen, which has about $20 million under management and is a relatively active trader that he said generates an average of 50 to 75 trades a year per account.

“Saving a few bucks on a $12.95 trade for a high-net-worth client is not a motivator” for most fee-based planners and advisers, said David Pequet, founder of MPI Investment Management Inc., an RIA in Hinsdale, Ill., that has about $260 million in assets under management.

“There are some prospects who would be insulted if you presented it as a reason to move,” said Mr. Pequet, whose four-person firm specializes in fixed-income investments. He said that he nevertheless is satisfied with his custodial relationship with Schwab.

Several other advisers, however, said that the most alluring part of the offer is reimbursement of the exit fees that brokers charge investors when they close and transfer their accounts. That can be a boon to investors, they said.

Transfer fees can range from as low as $35 to as high as $150, said Matt Bienfang, a consultant at Tower Group in Needham, Mass. Since many clients have multiple accounts, the total paid can be much higher.

“For a firm like ours that’s been building by attracting advisers from the brokerage firms, this is a pretty big deal,” said Felipe Luna, president of Concert Wealth Management Inc., a San Jose, Calif.-based RIA that uses Schwab’s custody services. “I haven’t seen a huge interest in the commissions, but the transfer fees were a significant deterrent for lots of people we talk to, especially those with clients who are older and living on fixed incomes.”

Concert, which has a little more than $1 billion in assets under management and 25 advisers, expects to hire five more advisers by the end of the summer — up from about $400 million in assets and 12 advisers a year ago, said Mr. Luna, a former branch manager at New York-based Citigroup Inc.’s Smith Barney unit who also was an executive at Zurich, Switzerland-based UBS AG’s U.S. broker-dealer.

Three or four of Concert’s adviser prospects came closer to making the decision after hearing about the transfer fee reimbursement, because it is easier for them to approach their clients about a move, he said.

CONVERSATION PIECE

The transfer fee offer also is giving CoreStates Capital Advisors LLC something to talk to prospective clients about.

“It’s not a deal maker, but it’s definitely a value-added thing that can make a significant difference in the conversation,” said Steve Barger, a financial consultant at the Newtown, Pa.-based RIA, which has about $249 million of assets.

“The commissions don’t affect us, because we’re fee-based and not big traders, but the exit fees can be a pretty big number when they have multiple accounts at certain wirehouses.”

Schwab’s promotion is likely to offset some of the friction it created this year by unexpectedly announcing that advisers will have to remove most of their clients’ private placements and other alternative assets from its platform, Mr. Luna said.

Schwab’s largest competitors haven’t to date matched the promotion, which expires at yearend.

“We’ll continue to work with our advisers one-on-one to customize incentives that best meet their needs and help them grow their business,” said Kristin Petrick, a spokeswoman for Omaha, Neb.-based TD Ameritrade Holding Corp.’s institutional business for RIAs.

Officials at Boston-based Fidelity Investments and Jersey City, N.J.-based Pershing LLC stood by their earlier responses, saying that their pricing will remain competitive, based on individual relationships.

Alison Wertheim, a Schwab spokeswoman, said it’s too early to assess results from the promotion.

E-mail Jed Horowitz at [email protected].

Related Topics: Charles Schwab & Co.