Bernie Clark leaving huge legacy at Schwab; successors face challenges

One of the executives most closely associated with Charles Schwab's services for independent financial advisors and registered investment advisory firms will step down next month.

The June 28 transition of Bernie Clark, head of advisor services for the Westlake, Texas-based wealth and investment management giant, to an unspecified executive advisory role will mark the end of a 14-year tenure. Clark first joined Schwab in 1998 as a senior vice president of trading and operations with Schwab Institutional. Over his time as head of advisor services, he presided over Schwab's consolidation of its top position in RIA custody — to the tune of reaching more than $4 trillion in assets from $650 billion in 2010, he noted in a letter sent to the firm's clients last week. Jon Beatty, the chief operating officer of the advisor services unit, will replace Clark as head, while Tom Bradley, a managing director and former TD Ameritrade RIA executive who came to the firm as part of Schwab's $22 billion purchase of its former rival in 2020, is becoming the division's chief client officer.

Schwab's growth is "a total testament to you — and proof of what I always say — your success is our success," Clark said in the message to nearly 15,000 RIAs.

"When I joined Schwab 26 years ago, I never could have imagined the journey I was embarking on, but I wouldn't trade a single second of the experience, and much of that is due to you," he said. "I have incredible respect and admiration for what you do and how you serve, and I will continue to advocate for you and tell your story. I am so excited to see where you take this industry next."

READ MORE: Schwab's Bernie Clark on the 'major changes' facing RIAs and clients

Legacy in the profession

Clark has been "a pillar of the industry" who's "going to be remembered as an advocate for the RIA," said Andrew Besheer, the founder of Besheer & Associates, a consulting firm to private equity investors in the wealth management industry.

"I don't think the timing says anything other than maybe, organizationally, they feel like they've gotten over the hump of the TD integration, and the noise levels have not increased, they've maybe subsided a bit," Besheer said in an interview. "It just feels like this is kind of a planned changing of the guard and handing the baton to the next generation of leaders there."

He "brought a good combination of executive presence, common sense and emotional balance to a business that by its nature is one of conflict and opportunity," said former Head of Pershing Advisor Solutions Mark Tibergien. He has known Clark as "as a respectful competitor" to his onetime firm, a humorous and insightful fellow conference panelist and as a customer when Tibergien was a practice management consultant with Moss Adams, he noted in an email.

"Bernie is the most recent in a long line of strong leaders of the Schwab RIA custody business.  While they were first to market to disrupt institutional brokers who historically served RIAs, Bernie had both the challenge and opportunity to manage Schwab's institutional business while their retail brokerage business grew into one of the largest direct to investor platforms in the country," Tibergien said. "Bernie can be fulfilled in knowing that his presence was felt and his approach to business and people was appreciated throughout his tenure. The timing seems right for him to move onto a new phase of his life while the next in line steps up to take on the increasing complexity of this business."

Schwab manages a great deal of complications between macroeconomic and industry forces as a publicly traded firm straddling huge RIA custody, retail brokerage and asset management businesses. 

READ MORE: Lightning Round with Schwab's Bernie Clark

It and its nearest competitor, Fidelity Investments, often face questions about whether and how the firms' retail businesses compete with RIAs and which advisory practices are eligible for the lucrative streams of referrals from them. 

In the highly competitive RIA custody business, Schwab vies against traditional rivals Pershing and Fidelity, large self-clearing companies like LPL Financial, Raymond James, Ameriprise and RBC and an expanding list of smaller competitors such as SEI, Altruist, Apex and Axos Advisor Services. For a highly fragmented industry between small RIAs and increasingly big ones that are vacuuming up companies by the dozen in M&A deals, vendors frequently confront criticism that they're favoring only the largest firms.

"It's really hard to be all things to all people. It's hard to say, 'I'm going to serve everyone, from the smallest RIA to the biggest mega-RIA, and I'm going to do that across the full spectrum,'" Besheer said, noting the many smaller advisory practices that Schwab turned into new custody clients via its acquisition of TD Ameritrade. "They certainly make it seem like they don't want to lose any of these advisors, but you have to wonder."

Industry praise

Without specifying the timing of their conversation, Schwab CEO Walt Bettinger said in a statement that Clark approached him "recently" to suggest the time was ripe for a transition after the Ameritrade conversion and an "exceptionally sound footing" for the RIA custody business. In his advisory role, Clark will be "offering his wisdom and counsel to me personally, as well as the entire leadership team," Bettinger said.

"His impact on the independent investment advisor industry is arguably unmatched, leading the industry from its infancy to become one of the fastest growing segments of the investment services world," Bettinger said. "He has also mentored and developed a strong bench of leaders, including Jon Beatty and Tom Bradley, who share his passion for the industry and will continue to deliver on our commitments to the independent investment advisors we serve."

READ MORE: Schwab and Fidelity referrals give certain RIAs business, deal others out

Clark's LinkedIn post last week coinciding with the announcement of the transition drew at least 70 congratulatory comments from industry leaders such as Dynasty Financial Partners CEO Shirl Penney ("Few people have made a bigger impact on the RIA space my friend"); Schwab Chief Investment Strategist Liz Ann Sonders ("Wow, will you ever be missed, Bernie. It's been an honor and a supreme pleasure to work with you during my 25 years at Schwab"); and President of UBS Americas Naureen Hassan ("I say personally thank you for your mentorship, sponsorship and friendship. My career wouldn't be where it is today without you").

Schwab's preeminent spot in the RIA marketplace comes with some challenges amid Clark's exit from his longtime position.

"I would say being first to market and the largest custodian to serve RIAs puts them in the catbird seat," Tibergien said. "As with every company that has dominated their market, though, the new leadership will need to continue to invest in both advisor experience and the client experience in order to protect their borders. But even if they experience erosion, which would be minimal at worst, the growing flow of clients and professionals to the fiduciary advisory model ensures this line of business will be key to Schwab's future earnings and asset growth at the same time they are seeing impressive growth in their retail business."

Additionally, the company could see more threats from rivals like LPL, which is "starting to cut into the share of the traditional custodians" by offering "31 different flavors of how you can work with us," Besheer said.

"There are new areas of competition that weren't out there before," he said. "It's not the Schwab-Fidelity-Pershing story anymore. There are two directions that the competition comes from that they really have to be thinking about how they defend themselves."