Charles Schwab is launching a digital onboarding tool next month, spurred by increased tech adoption of clients and advisors and greater internal attention to the firm’s software development. The custodian and financial services firm has been hinting at digital account opening and onboarding for years, but by the end of July advisors will be able to use Schwab’s Digital Account Onboarding (DAO) for certain Schwab One, IRA and trust accounts.
Advisors will be able to use DAO to onboard clients using individual, joint tenant, tenants in common, community property and custodial accounts, as well as IRAs that include contributory, rollover, Roth contributory and inherited IRA for individual accounts, alongside revocable and irrevocable living trusts.
“We're now [at] over 70% of account types,” said Alison Dooher, VP of the advisor digital onboarding division. “The real add to this process is the ability to include funding and other setup instructions within a single workflow for advisors.”
Schwab has also eliminated the need for a notary for the irrevocable living trust, replacing it with a proxy that includes setting up client credentials for the account.
The new capabilities are the “second wave” of capabilities planned for Schwab, according to Andrew Salesky, the firm’s head of digital advisor solutions. The firm is already planning a third development time line whereby advisors will be able to enable and fund multiple accounts in a single household using a single “digital envelope.”
“We are going to move aggressively down that path,” he said.” We actually have development underway already towards that objective.”
While advisors and clients may enjoy the look and feel of the fully digital onboarding process that will be launched next month, hiccups occasionally will arise, said Dooher. Even though 97% of digital account openings successfully transit the workflow on a fully digital basis, 3% can’t be completed or troubleshooted electronically and may need “some follow up or extra eyes,” necessitating manual problem solving.
Meanwhile, Schwab is still working to overhaul its manual back-end systems to match the digital front-end workflow. “We've already kind of developed a digital front end and a digital payload into our operational services,” said Dooher. But not all automation is complete within Schwab, and development will continue as the firm proceeds with integrating the technology and features of its TD Ameritrade acquisition into 2023.
Schwab’s digital onboarding is a “critical component” to meeting post-pandemic advisor and client expectations, said Alois Pirker, research director at Aite Group. After viewing the demonstration, he called Schwab’s deployment “timely” and noted that competitors like Bank of America Merrill Lynch launched fully digital onboarding earlier this year.
“After 1.5 years of social distancing, paired with higher business volume, onboarding has been a focus around the industry,” said Pirker. “You need to have this process down to get business in the door.”
“This is a critical component,” he added, and it’s “very necessary in today’s environment.”