Schwab executives urge RIAs to board the personalization ‘freight train’

As the RIA market continues its inexorable expansion, client service will get more personalized, Charles Schwab executives told advisors at their annual IMPACT conference this week.

These were two of the trends of an opening keynote with Schwab CEO Walt Bettinger and head of advisor services Bernard Clark to kick off the conference. Direct indexing, thematic portfolios and bespoke investment products are “coming like a freight train,” said Bettinger.

“I know that RIAs have seen this already and you’ve been personalizing for many of your clients for a long time, but many investors today are looking for an even higher level of personalization,” Bettinger said from the IMPACT stage, which was streamed to an entirely digital audience for the second consecutive year. “We all want to be a part of that freight train as it plows through the market.”

However, the executives shared few details on how the firm is helping advisors to get on board. Though Schwab acquired the technology from defunct thematic investing startup Motif Investing to build out a direct indexing offer, IMPACT did not offer an update on how, or when, those capabilities would get into the hands of advisors.

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In order to offer more personalized service to clients, advisors scale their practices, standardize workflows and gain operational efficiencies, said Clark. To that end, Andrew Salesky, Schwab’s managing director of digital advisor solutions, showed off a number of updates to the custodian’s technology and offered a preview of what’s coming next.

There are three legs to Schwab’s tech strategy, Salesky said. The first is around streamlining processes and reducing work by making Schwab Advisor Center easier to use and taking advantage of the capabilities of Veo One, the advisor technology platform acquired from TD Ameritrade. Second, Schwab is working to modernize its trading and investment management capabilities by integrating TD technology like thinkpipes and iRebal. The firm is hoping to complete the integration and have all of these features available to advisors in early 2023.

Finally, Schwab wants to make the RIA platform itself more customizable through deeper integrations with third-party fintech companies, more dashboards and an enhanced portal for software developers.

Forty percent of RIAs are using the digital onboarding the firm introduced over the summer, according to Alison Dooher, head of advisor digital onboarding. In the coming months, the firm is looking to expand the account types to include managed accounts and IRAs, allow for multiple accounts to be opened at once and add support for bulk transactions.

The firm is also taking a “deep look” at Institutional Intelligent Portfolios, the version of its digital advice product built for financial advisors, Salesky said. The technology has quite a bit of overlap with iRebal, especially around automated rebalancing, and Schwab would like to expand Institutional Intelligent Portfolios to include some of the model portfolios available on the Model Market Center.

RIA growth
Echoing comments from its recent quarterly earnings report, Clark and Bettinger discussed the opportunity for growth among independent financial advisors. Even with about $3.5 trillion in assets in its RIA custody business, Schwab still only has a small share of the market, Bettinger said.

“We’ve just scratched the surface,” he said. “We’ve got a whole lot of market share in front of us that we can win together.”

The executives also repeated that Schwab is invested in serving the needs of all RIAs, regardless of size. Since the acquisition of TD Ameritrade, which was a popular custodial platform for smaller advisors, the firm has faced skepticism about its interest in supporting the lower end of the market.

“Growing the RIA community strengthens every firm,” Clark said.

“No single advisory firm can possibly recreate for itself all of the benefits of us acting collectively,” Bettinger added.