Client Retention is Not a Barrier When Going Independent, According to “Sophomore Year” Advisors Who Custody with Schwab

Schwab Advisor Service’s new RIA Economic Discovery Tool designed to help advisors make informed decisions before moving to independence

Tuesday, April 9, 2013 10:00 am PDT



Public Company Information:

"the ability to provide more personalized service to clients"

SAN FRANCISCO--(BUSINESS WIRE)--While retaining clients remains one of the top three most important areas of focus for advisors when making the move to the independent model, advisors who have been independent for less than two years say the majority of clients stick by their side once they make the switch, Schwab Advisor Services learned from a series of recent interviews1 with forty “sophomore year” independent registered investment advisors (RIAs) who custody with the firm. Not only do clients agree to transition with their advisors as they seek independence, but most are immediately on board when told about the change.

According to industry research2, the RIA industry has witnessed an eight percent annual growth rate, more than doubling industry assets under management, from $1.3 trillion to $2.8 trillion over the past 10 years.

“As one of the fastest growing segments of the financial services industry, it is clear that the appetite for independent advice is expanding as more and more advisors turn to the RIA space,” said Jon Beatty, senior vice president, sales and relationship management with Schwab Advisor Services. “With industry growth comes more choice for advisors as they seek out a path to independence. Schwab works one-on-one with advisors to determine which solution is best for them, evaluates the economics, and helps develop a transition plan tailored to their needs.”

In the interviews, most advisors noted “the ability to provide more personalized service to clients” as being a very or somewhat important aspect in the decision to become an RIA, followed by “the preference to work for yourself.” Also important was the need to “protect their personal reputations” by moving to the independent model.

Supporting Advisors in the Move To Independence

Schwab helps advisors explore options for independence as they determine whether it makes more sense to start a firm or join one. Schwab’s dedicated Advisor Transition Services team then collaborates with the advisor to develop a customized plan for their specific circumstances.

In its most recent effort to advance the understanding of the model’s benefits, Schwab launched a campaign “Don’t change your ways. Change your world.” for advisors looking to move into the independent space, which included the creation of new advisor videos and case studies that discuss the entrepreneurial spirit that the independent channel embraces.

Schwab also launched a new RIA Economic Discovery Tool3 that provides a simple, at-a-glance hypothetical view of the financial benefits associated with the RIA channel as compared to other advisory models. After selecting an advisory model along with a few key estimates, advisors receive an in-depth economic analysis of an RIA’s earning potential, income growth and firm value over time, outlining what they stand to gain by switching to the independent channel.

“We’ve found that the economic decision can often weigh heavily on an advisor considering a transition,” noted Beatty. “With this tool and a conversation with a Schwab business development officer, an advisor can get a better picture of what the transition might mean to them.”

In addition to the RIA Economic Discovery Tool, Schwab has created a comprehensive suite of resources to help support advisors considering a move to independence, including access to industry-leading benchmarking research, proprietary diagnostic tools, templates, and case studies drawn from years of supporting RIAs.

Advisors “Own” Their Freedom

In every single case, the importance of entrepreneurship and the freedom of choice that comes with the independent channel rang true among the “sophomore year” RIAs interviewed. All of them said they would choose independence if they had to make the decision again and nine out of ten said they are happier now as an RIA and would recommend making the switch to their peers.

“In order to do the best job of offering advice for my clients, I realized that I had to become an entrepreneur,” said Leo Arms, Owner, Thomas Leo Advisory. “It’s very freeing to not have to answer to anybody other than your clients because you know that all you want to do is do a good job for them.” Here is more from Arms in this video.

Advisors interviewed also noted that it takes on average two years from the time they first consider the idea to when the transition is initiated. And, almost all agreed that the top benefits of going independent include the ability to earn a larger annual income and the opportunity for greater long-term personal financial success.

“It’s nice to see every new dollar that hits the bottom line and how it can impact the value of our firm,” said Brian Power, Chief Operating Officer, Gateway Advisory LLC. Here is more from Power in this video.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 300 offices and 8.8 million client brokerage accounts, 1.6 million corporate retirement plan participants, 881,000 banking accounts, and $2.04 trillion in client assets as of February 28, 2013. 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,, 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; compliance and trade monitoring solutions; 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 lending services and products. More information is available at and (0413-2610)

1 Koski Research conducted interviews between February 14 – March 6, 2013 with 40 independent advisors who became independent during the past two years and custody with Schwab Advisor Services. Those interviewed have been working in the investment advisory space for 15 years on average and manage a median $100 million in assets.

Koski Research is not affiliated with Charles Schwab & Co., Inc.

Experiences shared are not a guarantee of future success and may not be representative of your experience.

2 Cerulli Associates, Charles Schwab Strategy estimates,

3 The Economic Discovery Tool (Tool) is intended solely for use by investment professionals. The Tool simulates the pro forma financial results of various hypothetical scenarios for establishing, operating, joining and/or selling an investment advisory practice or firm and compares those simulated outcomes to various alternatives. The scenarios and alternatives covered are not exhaustive and may not be representative of those you actually encounter. The simulated pro forma results do not reflect, and are not guarantees of, actual or future results. Your actual results may be materially different than those simulated.

Third party advisors are not affiliated with or employed by Charles Schwab & Co. Inc. The mention of the firms is not, and should not be construed as a recommendation, endorsement or sponsorship by Schwab.


Charles Schwab
Anita Fox, 415-667-1308
The Neibart Group
Sarah Gormley, 718-875-2122

Multimedia Files:

ADVISORS TURNING INDEPENDENT - Interviews with "sophomore year advisors"
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