New Charles Schwab Report Guides RIA Firms on Recruiting Advisors Turning Independent

New Report the Latest in a Series of Resources Available to Advisor Firms Looking to Hire

Tuesday, April 27, 2010 6:00 am PDT

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SAN FRANCISCO

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SCHW
"Think hard about the long-range plans of the business and have lots of discussions to see if the individual’s long-range plans match up."

SAN FRANCISCO--(BUSINESS WIRE)--In working with the 6,000 independent investment advisory firms (RIAs) that custody assets with the company, Charles Schwab Advisor Services™ has found in the past few years that an increasing number are considering adding experienced advisors to their firms as a way to grow their practices, increase services for their clients, or create succession plans. As a result, Schwab now offers a host of resources, events and expertise to help RIA firm principals make informed decisions about recruiting advisors and to help them develop and execute a strategy that supports their business goals. The newest resource available to advisors is the Schwab Market Knowledge Tools® (MKT) white paper, Recruiting Advisors Turning Independent.

RIAs are currently the fastest-growing destination for advisors exiting full service wirehouse brokerage firms.1 In fact, 42 percent of the 172 new advisory teams Schwab helped transition to independence in 2009 did so by joining an existing firm. A recent Cerulli Associates report finds that RIA firms’ share of wirehouse advisors turning independent has grown nearly sixfold, from an average of 2.1 percent between 1999 to 2003, to 12.4 percent between 2004 and 2008.

“We are seeing an increase in inquiries from our clients about how best to bring in new advisors, as well as more interest from transitioning advisors about how they can find the right RIA firm to join,” said Bernie Clark, senior vice president and head of Charles Schwab Advisor Services. He noted that in 2009, Schwab held a record number of educational events for advisors considering starting or joining an independent firm, hosting 33 in-person events around the country for more than 200 prospective advisor teams representing more than $20 billion in assets under management. “With a thoughtful recruiting strategy in place, adding experienced advisors can be a great way for firms to gain new talent, serve new client segments, uncover potential growth and succession planning opportunities, and boost revenues.”

Schwab’s report uses the real-life case studies of Convergent Wealth Advisors of Rockville, Maryland; SeaCrest Wealth Management headquartered in Purchase, New York; and Gratus Capital Management of Atlanta, Georgia to underscore how three firms with distinctly different growth strategies brought on board advisors whose expertise and competencies fit within each firm’s larger business plan. Gratus founder and principal Hank McLarty offers firms sound advice when contemplating bringing advisors onboard, “Think hard about the long-range plans of the business and have lots of discussions to see if the individual’s long-range plans match up.”

According to the report, there are six considerations RIAs should take into account when developing their recruitment strategies:

  • Business strategy: Conduct a thorough assessment of the firm’s long- and short-term business goals, core values, and the personal objectives of the principals to clarify the types of candidates who can further the firm’s core mission and strategic goals.
  • Compensation and equity: Regardless of whether new talent is brought on as an owner or as an employee, the compensation negotiation must be consistent with the firm’s existing compensation philosophy, be competitive with the market, and be specific on incentive pay and ownership issues.
  • Recruiting and cultural fit: RIA principals first need to understand the most important aspects of their firm’s culture before they can determine whether any potential advisor candidates possess the qualities that will prove to be a good fit. With the firm’s own cultural due diligence completed, a profile of an ideal recruit can be developed, and the networking and recruiting process can be shaped accordingly.
  • Operational fit: RIA principals must ensure that their back-office infrastructure can support the new business brought on by an additional advisor or team of advisors. Firms must be ready to merge different systems and procedures for investing, client service, compliance and other crucial processes.
  • Legal issues: Potential candidates may have contractual agreements with their existing employers, which may restrict the use of client information or prohibit the solicitation of clients. It is essential that both the candidate and the RIA have their own legal counsel and take advantage of the Protocol for Broker Recruiting, an agreement among the major wirehouses and any other firm that wants to join. It facilitates clients’ freedom of choice when advisors move between member firms.
  • Onboarding and transitioning: The overall timeline of a transition, from first contact to completion of transaction and transfer of clients and assets, can be six to nine months or even more. To streamline the process, RIAs can work with advisors to plan and craft communications for retaining and transferring clients and for explaining the new arrangement. Providing training and formal documentation for new advisors on firm policies and procedures around operational and compliance processes will help expedite the transition.

The report includes an RIA Readiness Checklist to help firms assess their preparedness for beginning the recruitment process, as well as a recruitment and transition timeline.

Schwab also offers numerous additional resources to RIA firms on this topic including worksheets that help them think through goals, client and employee profiles, firm culture, and value proposition. Schwab Advisor Services relationship managers and business consultants have been trained to use the materials in their conversation and consultations with advisors. Schwab also hosts an online listing service for advisors to post openings or to find possible firms to join at www.schwabtransition.com.

For more information about the MKT Report or any of Schwab’s resources, advisors can contact their Schwab relationship manager or visit www.schwabadvisorcenter.com.

About Schwab Market Knowledge Tools® (MKT) Reports

The Schwab Market Knowledge Tools series is an ongoing program of industry research reports, white papers and guides from Charles Schwab designed to keep investment advisors on the forefront of trends and competitive challenges facing the industry today. Offered exclusively to Charles Schwab’s valued clients, the Schwab MKT program delivers the kind of relevant and timely information needed for future business planning.

Information provided is for general informational purposes only and is not intended to provide specific financial, compliance, regulatory or legal advice. Schwab makes no representations about the accuracy of the information or its appropriateness for any given situation. For further information, please contact your legal counsel.

Independent investment advisors are not owned, affiliated with or supervised by Schwab.

About Charles Schwab

The Charles Schwab Corporation (NYSE:SCHW) is a leading provider of financial services, with more than 300 offices and 7.8 million client brokerage accounts, 1.5 million corporate retirement plan participants, 768,000 banking accounts, and $1.49 trillion in client assets as of Mar. 31, 2010. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender) provides banking and mortgage services and products. More information is available at www.schwab.com. (0410-2548)

1 Advisor Migration: The Changing Landscape of Retail Distribution, Cerulli Associates, September 2009.

Contact:

Charles Schwab
Lindsay Tiles, 415-667-0479
lindsay.tiles@schwab.com
or
Makovsky + Company
Janet Yoo, 212-508-9606
jyoo@makovsky.com

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