Charles Schwab President and CEO Walt Bettinger said the firm does not expect a slowdown from business with registered investment advisors; in fact, the exec told analysts on a business update call Tuesday that the RIA business had a strong first quarter.
“The RIA community continues to have success,” Bettinger said on Tuesday’s call. “We really think that the notion that RIAs will slow business with us as the date for closing of the transaction with TD Ameritrade approaches is not something that is likely to unfold. We have deep relationships, very positive relationships with the vast, vast, vast majority of the RIAs we work with. Our belief is that TD Ameritrade does also, so we’re not anticipating any kind of meaningful change in the trajectory of that business as that date approaches.”
Bettinger said the TD Ameritrade acquisition remains on track and is expected to close in the second half of this year. The Department of Justice continues its thorough review of the transaction, but the firm is optimistic that the deal will be approved, he added.
After Schwab announced plans to acquire competitor TD Ameritrade late last year, the custodian dealt with speculation that it has little or no interest in serving smaller RIAs, which tends to be TD’s core business. But Bettinger quickly shot down that idea; in fact, Head of Schwab Advisor Services Bernie Clark said the sub-$100 million RIA is a “sweet spot” for his firm, as it has been since the beginning of the RIA custody business.
On Tuesday’s call, Bettinger said RIAs with less than $300 million in client assets custodied at Schwab were growing at faster rates than larger firms.
“Some of the growth rates of RIAs below $200 or $300 million were actually some of the highest organic growth rates on our platform,” he said.
Bettinger said the firm continues to build out its efforts to serve RIAs; the firm has seen high levels of engagement in its educational, consulting and market analysis programs. In October, the firm rolled out the Schwab Alternative Investment Marketplace, a platform that gives advisor clients access to third-parties that offer menus of private funds.
The firm also recently launched a Virtual Practice Management offering, to bring consulting services on strategic planning, growth strategies, referrals and cybersecurity to smaller advisors. That program consists of online, on-demand videos, exercises, whitepapers and live meetings with a business consultant, to help firms achieve their growth goals.
As far as dealing with the coronavirus pandemic, Bettinger reiterated that most employees are working from home, and the company is committed to no layoffs during this time. And while a lot has changed in the past three months, the firm's strategy has not changed; it remains on the offense, and business is strong, he added. In fact, the firm brought in $73 billion in net new assets during the first quarter, up 42% from the first quarter 2019. At the same time, clients are holding more cash. Client cash currently accounts for 15% of total client assets, compared with 11.3% in the fourth quarter. That lift in cash was driven primarily by clients selling out of fixed income positions, rather than equities.
“We recognize that the overall world as we know it has changed likely forever with the COVID-19 pandemic, and as a result our clients have engaged with us at truly unprecedented levels, and we’ve been there for them," he said.