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Commonwealth CEO Wayne Bloom Image via Commonwealth Financial Network
Commonwealth CEO Wayne Bloom speaking at the broker/dealer's 2023 national conference.

Commonwealth to Expand Custodial Relationship With Schwab in 2024

The $270 billion firm is also getting more active in its Entrepreneurial Capital program, including helping advisors with M&A.

Commonwealth Financial Network, the Waltham, Mass.–based independent broker/dealer with about $270 billion in assets, currently custodies primarily with National Financial Services (Fidelity), but it does accommodate outside custodians, including Schwab, for advisors who ask. The firm expects to expand its custodial relationship with Schwab in a more “meaningful way” next year, CEO Wayne Bloom said in an interview with

“Those relationships have really been brought to bear mostly through our advisors doing acquisitions of Schwab business,” Bloom said. “In 2024, we’re going to be doing some new things with our RIA, and you’ll see us being more active beyond Fidelity as a sole custodian. But by all means, Fidelity will remain our primary custodian.

“To bring it on par with the technological sophistication that we have with Fidelity, that’s deep integration, those additional features will come online starting next year at some point,” he said.

Commonwealth held its annual advisor conference last week, and announced several enhancements to its platform. For one, the firm has expanded its Entrepreneurial Capital program, becoming more active in helping its advisors do mergers and acquisitions. Its initial financing suite, launched in June 2022, was “passive,” Bloom said; the firm would do valuations based on earnings and revenue conversions. The firm did about 70 transactions last year.

“We originally structured them that way because our thinking was, being fiercely independent, the advisors would rather do a revenue conversion and not having us in their expenses, looking at their books, being that involved in the business. For some it worked, and for others, they said, ‘Well, we’d rather have a true partnership. If the market goes down, if expenses get tight, we’d prefer a traditional earnings or EBOC (Earnings Before Owners Compensation)-type deal.’”

Under what Blooms calls “Entrepreneurial Capital 2.0,” advisors will have the option of doing a top line or bottom line deal, and if they prefer, Commonwealth will get more involved in strategy, doing deep assessments and even operating as a board member. The broker/dealer has not done any of the EBOC deals yet; he said the firm will take up to 40% of a firm’s earnings in exchange for capital. The firm is also considering taking majority stakes in Commonwealth advisor firms, although that’s not an offering yet.

“We’re trying to really strengthen the ties between Commonwealth and our big enterprise clients, so we can just be aware of what they’re doing and help guide them or give them advanced looks at what Commonwealth is developing.”

“They’re trying to have it be that for the full lifecycle of that advisor’s practice, they can have solutions and resources for them,” said Jodie Papike, CEO and managing partner of Cross-Search. “The program really lends itself toward that advisor that’s maybe in that last 10-15 years of their career, and they don’t want to cash out. They can stay very involved in their business, but they can have capital to use almost like a small monetization of their practice, without having to sell fully.”

Papike said it might be hard to get Commonwealth advisors interested in a majority deal option, given their fiercely independent nature. 

"In the Commonwealth ecosystem, their advisors are extremely independent and most of them have been for a very long time, so to give up any kind of control would be difficult. But I point to the fact that advisors do want options, and they don’t necessarily want it to be one way," she said. “Advisors at the tail end of their careers would look at something like that as maybe a step toward retirement."

The firm has also taken steps to open the pool of potential buyers and sellers with a new relationship with Succession Link, a matchmaking service for wealth management firms. For a lower price, Commonwealth advisors get access to Succession Link’s platform, giving them eyes into the internal practices looking to buy or sell, as well as external firms.  

“It’s all designed just to facilitate these transactions, help our advisors who want to exit have nice smooth transactions, and help the advisors who want to grow get assets and buy practices already on the system. The assets are here; they onboard very easily; the staff doesn’t need to be trained. It really works well for both sides of the transaction,” Bloom said.

Commonwealth’s plan to go multi-custodial is part of its efforts to lean into the RIA and fee-only channel; some 90% of asset flows are now fee-based. Roughly 250 Commonwealth advisors have fully dropped their Series 7 FINRA license, with the vast majority opting to operate under Commonwealth's corporate Form ADV. About two dozen advisors have chosen to register their own RIA, using the Commonwealth suite of services to support the business.

“There’s just a lot of activity on advisors wanting to drop FINRA. It gives them a little more flexibility. They can save a little money because we have less compliance expense. But the big one, I think, is their ability to hold themselves out as fee-only in the community,” he said.

Commonwealth will buy out a rep’s commission-based trailing revenue to let them to drop their FINRA license and clean their books of the legacy assets. The advisor still has visibility into those assets in their tech feed, and they still service the client account from an advisory perspective.

“If you look at the industry, the firms that are having the most success today realized quite a while ago that the movement is really going to the advisory side. Some firms, in my opinion, kept their head in the sand, and said, ‘We’re broker/dealers only, and that’s what we know,’” Papike said. “Commonwealth—quite a long time ago, I feel—saw that trend happening and said, ‘We’re not going to be stuck behind. We’re going to evolve with the changes, and with the industry.’ Yes, there’s a still a broker/dealer, but in a lot of aspects, they function just as RIAs do.”

Despite the activity, Commonwealth is not going to drop its brokerage business; there are still some unique products that are commission-based, and it’s important from a recruiting standpoint to provide advisors with a “soft landing,” Bloom said.

Bloom said the firm is considering adding an employee channel, and would likely seed that affiliation model through an acquisition.

Commonwealth also announced at the conference that it would add a third home office in Cincinnati, Ohio, in the first half of 2024. This office will house two of its primary call centers—its help desk and service center. By hiring call center talent in Cincinnati, the firm is hoping it will get people who want to stay longer in those type of roles.

“There’s a lot of existing call centers in that area, so we think there’s a great pool of talent there that we can add,” Bloom said. “We like people in those roles a little longer, and in Cincinnati, we examined a few different places in the United States, people tend to stay in those service or call center roles a little longer, so we think we can add some stability and maturity and tenure to those roles.”

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