The future of financial advice as seen by Charles Schwab’s Bernie Clark

What’s new with your client? Data will tell you before they do

November 20, 2019 2:23 PM

Schwab has a prediction about the future and it’s, well, predictive. In coming years, advisors won’t need a phone call or email to learn when a client is making a down payment on a house or paying caterers for a big wedding. Instead, data will predict and alert those expenses, says Bernie Clark, head of Schwab Advisor Services.

In his conversation with Financial Planning’s Editor-in-Chief Chelsea Emery, Clark also detailed the firm’s investments in banking services and addressed whether the firm will compete with Amazon for data — and how it is used.

So advisors won’t have to wait for a phone call?

You know how you go see your doctor and make sure you’re checked periodically? Data is going to be that dynamic check. Advisors will be signaled — they’ll notice that the wedding planners have been hired or money's going out to the church for the ceremony. Children reach the ages of [needing] cars. [Data] is going to start becoming far more predictive. It's not always about financial things, but [instead] life planning. Artificial intelligence in the future will give advisors a better angle into that life planning.

Many financial firms collect client data but they lack tools to either collate it or to turn it predictive. Where is Schwab on that continuum?

We're certainly taking opportunities where we can. I think it's going to become much more profound. It's going to be rich.

We always put the advisor in the center of our relationship, but think about the millions of accounts we have on the retail side as well. [Eventually we’ll] be able to use technology to reach out to clients and say, ‘Hey, can I help you with this?’

We are already working on things where [the technology] looks out and says, ‘Hey, you've been on our website and you keep getting to the third level of our website, but you haven't taken any action.’ And that's not going to be a person calling, necessarily. That could just be the system coming back and saying, ‘Can we help you? Are you getting stuck? Is there another question you have? Can we have someone call you?’

[The system] is doing some of the legwork that that would be done if [an advisor] were sitting in a room with someone, but they’re doing it ahead of time. [That frees up time for] the higher-value conversations that should happen in person. You deepen the relationship when you’re using the data to get to the need and then having a conversation with the individual.

Will Schwab compete with Amazon for how data is used?

We're all going to compete for data. Some are learning how to use it more quickly. We have many data projects underway within our firm because we have to make it useful, right? We [all] have a preponderance of data.

In fact, one would argue that Amazon, Google and Apple, for that matter, don't really want to be in financial services. They want the data of financial services. In a neat way, they've kind of found, through credit cards, that there's a way they can get to some of that data. So I wouldn't wouldn't call it a competition by any means. If there’s a competition, an advantage to be had, it’s how the data gets used.

We're very strict about our privacy rules. It's how we use the data — and not how we sell the data. Now the Amazons and the Googles and whatnot, they're making money in selling the data outside of their firms.

Any new tech announcements coming? Can you give me a heads up?

The digital work that Andrew Salesky [Schwab’s head of digital advisor solutions] and his team are doing is critically important — in account opening, digitizing forms and creating scale. We know that economics in the future are going to continue to be stretched, so being able to do more with the same cost structures is going to be incredibly important.

You're going to see a lot of our technology focus around cybersecurity. That's the most critical point on everybody's mind.

And we're starting to see a mind shift where advisors are embracing the concept of more mobile technologies as opposed to desktop.

Read more:

Can digital fix this 'embarrassing' problem? Q&A with Schwab's Andrew Salesky

Schwab is expanding its banking services. How do the company’s initiatives in new technology tie into the banking offerings?

Bringing someone's entire financial life together … How can you do that without assets and liabilities? How can you do that without banking? Fundamental things like credit cards, checking accounts and savings accounts, coupled with investment accounts and all the way up into partnerships and alternative investments. Everybody would like to see that together.

Data accumulators such as Yodlee were so popular in the past because nothing was together — they had to try and bring it all together in sort of arcane ways. That technology is getting better. But in reality, you can come here and can have your banking relationship [and] your broker-dealer relationship and have an advisor working with you. There's data flow between us and the advisors. It's really going to be a nice offering.

I don't see anybody else heading [in this direction] or having the capability to head in this direction.

Read more:

Schwab set to offer ‘a lot more’ banking capabilities

How much is Schwab investing in developing this initiative?

We've been heavily, heavily invested in our project portfolios. It's always difficult to talk about a technology number because the number is larger than you could even imagine. But our project of portfolios have been, over the past five years, in excess of $300 million. That's just project spending, not coupled with all the other spending that we're putting in place. We're heavily weighted on this.