Schwab to roll out benefits package for advisers

In an effort to get more wirehouse brokers to break away and become independent registered investment advisers, Schwab Institutional plans to roll out today an all-in-one benefits and payroll package designed for the newly independent RIA.

Schwab advisers can get a package of life, health, disability and dental insurance, a 401(k) plan, payroll administration, employee incentive plans and human resources consulting. Advisers will be billed monthly by TriNet.

Any size adviser, including a sole practitioner, can use the package and customize it, according to Barnaby Grist, managing director of strategic business development at Schwab Institutional in San Francisco.

Schwab is partnering with TriNet Group Inc., a San Leandro, Calif., human resources consulting and employee benefits firm, to offer the service.

Advisers might save as much as 20% in their benefits and payroll processing costs. Those costs can run $100,000 or more a year at the typical advisory firm, Mr. Grist said.

In addition to the time that would have been spent finding and assessing vendors, “a $200 million team will probably save $25,000,” he said.

Keith Gregg, chairman of the Washington-based Wealth Advisor Institute, said the group has successfully offered its own outsourced health insurance package to independent broker-dealers and advisers. Seven independent firms use its health benefits package, he said.

Independent advisers want something tangible from trade groups and providers, said Mr. Gregg, who is also co-chief executive at First Allied Securities Inc. of San Diego. “That’s why the upfront [recruitment] check is so prevalent, even in the independent space.”

Companies such as Schwab “can’t be a passive partner anymore,” Mr. Gregg said. “I think we’ll see more companies doing that.”

Schwab’s package is unique among custodians, Mr. Grist said. Some independent broker-dealers offer health plans but not payroll administration and HR functions, he said.

The company expects that the offer will help wirehouse representatives make the transition to owning their own advisory firms.

“It’s like breaking away from the mother ship,” Tom Lydon, president of Global Trends Investments of Newport Beach, Calif., said of brokers’ leaving the wirehouse world.

Established brokers have “clients, but it’s [building] the back office and creating a benefit structure” for employees that’s the challenge for small advisers, said Mr. Lydon, a Schwab-affiliated adviser.

Anything Schwab can do to share its purchasing power with advisers is a good thing, he added.

Schwab expects to attract about 100 advisers from the wirehouse firms this year, double last year’s rate, Mr. Grist said.

What is driving the move by advisers is frustration at the “lowest common denominator” approach brokerage firms must adopt, he said — such as compliance constraints, which “can drive people crazy.”

Schwab hasn’t been indundated with defectors from A.G. Edwards & Co. Inc. of St. Louis or Wachovia Securities LLC of Richmond, Va., since the merger of the two firms was announced in May, Mr. Grist said. But there has been an influx of advisers. “They’re coming from everywhere.”

Schwab this year began offering new advisers help in locating office space, buying errors-and-omissions insurance, developing financing packages and arranging partnerships with legal and compliance consultants, he said.

Dan Jamieson can be reached at [email protected].