Schwab targets smaller RIAs to help expand branch network

Charles Schwab aims to attract smaller RIAs by expanding its retail network

The Charles Schwab Corp. plans to grow its branch network by setting up new outlets run by independent operators.
In a presentation to analysts, chief executive Walt Bettinger said that some of the independently run branches could be headed by outside advisers who custody at Schwab Advisor Services.
“We’ve received some indications of early interest from RIAs at the smaller end of the [assets under management] scale who are intrigued with converting to this [independent branch] model,” Mr. Bettinger told analysts.
It’s unknown how many of the new branches might be run by RIAs, or how well that set-up might work.
The independent offices will be run by managers who are not employees of the company, but the outlets will market and sell all the same products and services that Schwab’s existing branches offer to do-it-yourself investors.
Mr. Bettinger declined to get into details about the new setup, including how the independent branch operators would be paid.
The firm will begin beta testing the new model in the third quarter of this year with a “modest” number of the new outlets, he said.
The eventual goal is to “significantly expand” the current network of 305 Schwab retail branches into communities that are not now served by the company, Mr. Bettinger said.
He dismissed concerns that the independent branches might compete with the 6,700 advisers who custody $655 billion at Schwab.
The independent branch operators will target mass affluent clients who have lower asset levels than Schwab-affiliated RIAs, he said.
The firm’s RIAs “use more sophisticated, individualized solutions, whereas our retail business focuses on more standardized, scalable solutions,” Mr. Bettinger told the analysts.
The independent branch operators will also refer suitable clients to Schwab RIAs, he added.
Schwab also plans to introduce later this year a 401(k) plan offering using all index funds.
In the first half of next year, the company will have an all-ETF 401(k) plan that offers true intraday trading, Mr. Bettinger said.
The all-ETF plan will be unique in the industry, he said.
“No one of scale and consequence in the industry has the motivation to tear down [an active management 401(k)] business model that may be critical to their … success,” he said.
RIABiz reported Schwab’s plans earlier today.