RIA Rising

More heat on Schwab's advisor franchise program

Charles Schwab is promoting its new franchise for advisors who are looking to work with investors under the Schwab name. But the plan drew some skepticism at a conference call with CEO Walt Bettinger in April, and now more critics are emerging in the blogosphere as well.

To recap: Schwab has said it will begin selling franchises to advisors in the second half of this year, providing turnkey solutions and 25 to 50 "seed" clients to get advisors started. The goal would be for advisors to generate $10 million to $20 million in net new client assets annually. The offices would be in locations not currently served by the roughly 300 existing Schwab retail operations.

Bettinger said at the conference call that the company wasn't looking for advisors who planned to open multiple offices, a move he saw as undermining Schwab's influence in the business arrangement. Bettinger was adamant that the solo office model would work for advisors: “All I can say right now is the economics do work and are attractive for a person who is committed to building something,” he said.

Advisor John Benedict, who blogs at The Cynical Advisor, questions whether RIAs would benefit from the practice. Founder and Chairman Charles Schwab says clients outside of Schwab branches sometimes want face-to-face meeings with advisors.

Benedict writes, "I am pretty sure that there are enough institutional RIA advisors available to service rural areas. Why not refer those clients to them? Additionally, technologies like email and Skype make distances a non-issue for most RIAs. Why not take your trained retail advisors and let them become RIAs with Schwab Institutional? Would Schwab stand to make a similar amount of money under this scenario?"

The debate clearly will continue to rage. By the way, if you’re an advisor who has Talked to Chuck about its franchise offering, I would love to speak to you confidentially about how the conversation went. Reach me at [email protected] or call 212-204-4261.

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