Charles Schwab Corp. says expanding its investor services unit by a few hundred new retail outlets won't raise a conflict with its own advisor custody business.
The company said it believes that its own-brand storefronts and the unit that supports independent registered investment advisors cater to different kinds of customers. "We see this as an expansion of our current structure," said Andrew Salesky, the Schwab executive in charge of the expansion.
Schwab Investor Services, the discount business, provides brokerage, banking and other financial services directly to consumers via the Internet, telephone and about 300 walk-in outlets in all but five states, Salesky said. At the end of March, it accounted for $714.8 billion of assets.
Schwab Advisor Services provides RIAs with custody, trading and other services. It custodied $688.6 billion for about 6,000 firms at the end of March.
With hundreds of thousands of dollars invested, the average Schwab discount customer is fairly affluent, but clients of its RIA business tend to be richer. And, unlike do-it-yourselfers who favor the discount line, they tend to want continuing investment, financial, tax and estate planning advice.
Schwab plans to add discount storefronts in promising U.S. markets starting this year. And instead of putting employees in them, as it has up until now, it hopes to attract franchisees. The idea is get five or 10 franchisee-run outlets up and running by 2012. But there could be opportunities for hundreds of franchisees in the long run, according to Salesky.
A franchise goes for between $25,000 and $50,000. The split is about fifty-fifty. Salesky said franchises will appeal to brokers employed by a national or big regional firm who want a degree of autonomy without losing the backing of a big brand and independent brokers who want a big brand's backing while remaining entrepreneurs.
Jeffrey Sica runs Sica Wealth Management in Morristown, N.J., an RIA that custodies assets with Schwab. He has no objections to Schwab boosting its retail presence — and he understands why some advisors might like to work with Schwab in a way that puts the brand front and center.
"It's tough to build a brand when you're independent," Sica said. "It's something we spend a lot of time and resources on."
As an independent RIA, Sica Wealth Management doesn't use Schwab branding. But its owner pegs Schwab as one of the few big financial service brands that came out of the crisis of 2008 intact.
Schwab's move to expand its retail business doesn't faze David Hulstrom of Financial Architects of Woodstock, Ga., another RIA that uses Schwab for custody. RIA owners "who feel threatened by it have got other problems, big ones," he said. In Hulstrom's view, a well-run RIA is a "sticky" business based on relationships and advice.
