Participation in a key
Charles Schwab
referral program could get a little more expensive for independent financial advisors.
Charles Schwab
Trong Nguyen / Dreamstime
The company is considering whether to raise fees for registered independent advisors, otherwise known as RIAs, that participate in Schwab’s client referral program. Through that program, the company provides a warm introduction to its customers who need financial advice.
A representative for Schwab confirmed it is “evaluating” its pricing with regard to the program after a long period of not altering its fee structure.
“We have not changed the advisor participation fees for Schwab Advisor Network, a core component of how we deliver on the holistic wealth management needs of our clients, for many years,” she said in a statement. “As the scale and complexity of the program has evolved, we are evaluating the advisor participation fees going forward. Our commitment is to first being transparent with firms in the program as these decisions are made.”
Industry news publication InvestmentNews reported earlier on Schwab’s pricing reevaluation.
Advisors who participate in Schwab’s referral program have to meet certain criteria, such as being primarily fee-based and managing at least $250 million in assets. The company charges advisors a fee that scales based on the referred client’s assets. For example, 0.25%, or 25 basis points, on the first $2 million and 0.2%, or 20 basis points, on the next $3 million.
Just 140 registered investment advisors participate in Schwab’s client referral program. That’s a small sliver of the 15,000 RIAs that Schwab serves. But the referral pipeline can be a critical source of growth for advisors.
For Schwab, it’s also a way to retain client assets by connecting customers who need comprehensive financial advice with competent and independent advisors. In an interview with Barron’s earlier this month, Schwab President Rick Wurster said the company’s program is a critical asset. “More and more retail clients come into our branches and say ‘Gosh I would like some help managing my portfolio.’ So our advisor referral network is a big way that we respond,” he said. “It’s been very successful.”
Client referral programs are a common feature at Schwab and other custodians such as Fidelity Investments, and can be a reason that an independent advisor chooses to custody client assets at one custodian over another.
When
Robinhood
announced plans this week to acquire custodian TradePMR, it highlighted its intention to create a referral program for advisors. “We will create a world-class referral program that advisors will love to be part of,” Steven Quirk, chief brokerage officer at Robinhood, told Barron’s.
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