They didn't get to "Talk to Chuck," but attendees of the 2007 Schwab IMPACT conference did get a chance to talk to Walt Bettinger, president and chief operating officer, as well as Charles Goldman, executive vice president of Schwab Institutional in an afternoon Q&A session at the Mandalay Bay Convention Center in Las Vegas.
About 100 or so attendees filled the room where the two executives sat on stage and spoke candidly about the future of Schwab and the role RIAs play in the growing company. Bettinger opened up the session by discussing the impressive growth numbers at the firm—20 percent growth in the third quarter this year compared to the same period a year ago; third quarter 2007 pre-tax profit margins of 40 percent. Bettinger says his focus going forward will be continuing that growth while making the process as transparent as possible.
Bettinger also told advisors that he wants to build on the company’s integrated strategy, which serves all three kinds of clients (traditional do-it-yourself investors, investors who want "light" advice, and those who are looking for in depth relationships with RIAs). Today, the traditional DIY space accounts for the largest share of client assets with $600 billion, but he says that number will dwindle. By comparison, Schwab's RIA sector has about $580 billion in client assets while the "light-advice" investor space has between $70 billion to $75 billion.
One advisor asked whether the company has considered buying up some of its RIA clients’ businesses to help them with their succession planning. "We've talked about that every year for the past six years. But there are a couple problems with that," Goldman responded. "We're in the custody business, and we want the relationship to be with all of you. We don't think we could add value by owning five or six of you." Bottom line, Goldman says: It's neither economic nor strategic for the firm to buy any of its RIA clients.
And don't expect Schwab to develop the "Next Big Product." When asked about the company's plans for investment management, Bettinger says the firm wants to keep it simple. "We're not looking to develop the next large cap growth fund. Instead, we want to be more in line with all-weather type solutions." He did say the firm is looking into "de-accumulation funds" that will help investors spend down their assets. "We only build what clients say they want, and not what looks good on paper," he said.
As far as new services for RIAs, Goldman says Schwab will launch a pilot program that help them finance mergers and acquisitions. "We are going to launch a program early next year to help firms buy other firms by offering loans," he says.
The one gripe an advisor had: Why not expand the "Talk to Chuck" marketing campaign to advertise the company's RIA business? To that, Goldman responded that his team is struggling to come up with a marketing campaign that can take such a complex message about what RIAs can do for investors and simplify it. "If you all have ideas for that, tell us because we haven't figured it out," he said.