Schwab Dangles a Consulting Service for Indy Advisors

The 4th of July is a ways off, but Charles Schwab wants RIAs to be thinking about independence.

The financial services giant will also help breakaways get there, for a fee. And more importantly, it hopes newly independent RIAs will custody at Schwab. The firm this week announced a membership-based consulting program, Schwab Advisor ProDirect, aimed at helping small independent RIAs build up their businesses. Coincidentally, the forthcoming program launches in — you guessed it — July. And there may be some fireworks.

A problem the company says advisors face is one common in the age of Amazon: Too many choices. “The program begins with a one-year membership. During this crucial early time, the member’s consulting, service, and relationship teams are working hands-on to help implement our guiding principles for advisory firm success,” a company spokesperson said. “Importantly, participation includes access to an exclusive membership network, offering the peer-to-peer relationships that so many advisors tell us they value, but have trouble establishing on their own.”

Head to Head

With a membership-based consulting program, Schwab is competing, to an extent, with XY Planning Network, Dynasty Financial Partners, and other RIA support services. It’s aimed at advisors who manage $50 million to $300 million and is separate from the onboarding and custody programs at Schwab Advisor Services. 

Here’s how it compares at a glance:

• Schwab Advisor ProDirect charges $21,000 for the first year, billed at $5,250 quarterly and renews quarterly after a year.
• XY Planning’s Emerald membership, which is separate from its turnkey RIA affiliate model, charges $520 per month, and additional services such as bookkeeping and registration support are extra.

Schwab’s model appears more focused on established advisors who break away from broker-dealers, said Michael Kitces, co-founder of XY Planning Network. “Advisors who just want to start ‘new’ with an RIA can join networks like XYPN for barely one-third of the cost of Schwab to get compliance support, tech, practice management training, community, etc.,” he said. Schwab may be going up against other independent advisor support networks, recruiters, consultants, and corporate RIA models that help with breakaways, he said. “It really begs the question of why Schwab felt the need to compete with the organizations that already bring advisors to them, rather than support the ecosystem that’s already grown to drive breakaways (which already plays to Schwab’s favor) and/or make strategic investments into the organizations that are already growing with them (as Schwab did a few years ago with Dynasty, for instance).”

Filling a Need. “It’s absolutely a needed service,” said Jodie Papike, partner at advisor placement services firm Cross-Search. “A lot of advisors that are considering setting up their own RIA have a hesitancy to being completely on their own.” Following Schwab’s somewhat recent integration of TD Ameritrade, “there has been a transition period, where a lot of advisors have felt a squeeze at Schwab on service,” she said. “In order for this to be successful … they will have to staff really well to provide a high level of service to justify the cost of it.”