Charles Schwab is set to launch its new registered investment advisor membership program with 10 RIAs next year and has plans to add roughly that amount every month going forward.
Shawnette Gauer, managing director of enterprise solutions at Schwab Advisor Services, said the firm was stressing “quality over quantity,” with expectations that at least 10 more RIAs will join monthly, with the potential to scale up to more in time.
“It will be a very high-touch program,” Gauer said on the sidelines of the firm’s annual RIA conference, Schwab Impact, in Denver. “This is right where we want to be to test and learn and grow and get feedback from early members.”
Schwab launched its Advisor ProDirect program earlier this year, targeting breakaway RIAs with assets ranging from $50 million to $350 million, offering, in part, to help stand up those new firms.
This week at its Impact conference, the firm announced it was opening the program to all its custodying RIAs. Gauer said that after the announcement, the firm received interest from its base of 16,000 advisor clients.
“We say the program is to launch, connect and grow—the connection and growing is relevant whether you’re a prospect coming on board or an existing client,” she said.
Membership for both breakaway and established RIAs costs the same at $5,250 per quarter, or $21,000 annually, with a one-year initial membership that is then renewable quarterly thereafter. Services include business and growth consulting, advisor coaching and curated products from third-party vendors with potential discounts.
Schwab is expanding its membership program at a time when independent advisors have access to more platforms and options outside of custodial relationships, including breakaway platforms and other guidance and service programs.
XY Planning Network, a fee-only advisor member platform launched in 2014 by Michael Kitces and Alan Moore, has built a community of up-and-coming RIAs through its $520-per-month base subscription model. This March, it reported membership had risen to more than 2,000 advisors.
Derek Frosh, founder of Hanover Square, based in Winston-Salem, N.C., will be among the first RIAs in Schwab’s new program. He broke away from UBS to start his own firm in July and said the Schwab initiative was attractive as he transitioned from the wirehouse environment.“The restrictions are gone,” Frosh said. “With that, though, comes a whole new set of challenges. I don’t want to go chasing bright and shiny objects just in the name of growth.”Frosh said he plans to work with Schwab’s consultants on some of the early-stage setup of his firm. In the near term, that means determining his first hire, including their role, compensation and career path setup.“I wear too many hats, and if I’m going to grow the firm, I’ve got to offload some of those responsibilities,” he said. In time, Frosh expects to use the program for organic growth strategies.
Gauer stated that Schwab utilizes its annual RIA benchmarking study to inform the consulting and educational aspects of its membership program. She noted five principles exhibited by top-performing RIAs that consultants will use with members.
“Firms that incorporate these principles into their business have outsized results,” she said. “We know from our benchmarking study that over a five-year period, they grow by two times the AUM, two times the revenue and 2.6 times the client growth.”
She also pointed to the potential advantages of a consistent relationship with a consultant.
“You can be an advisor and you can kind of get in the queue, if you will, for certain consulting, but it’s going to be maybe a one-and-done,” she said. “It’s not an ongoing relationship where that consultant is just working with you on a regular, intentional cadence.”