Schwab expands focus with consultant relations group

SAN FRANCISCO — The Charles Schwab Corp. is cloning the services it provides to registered investment advisers, offering a similar platform to consultants that advise small institutions and high-net-worth individuals.

The move is a departure for the San Francisco-based firm, which is broadening its focus beyond RIAs and creating a dedicated consultant relations group to reach that new market, said Barnaby Grist, managing director for business consulting at Schwab Institutional, the group that handles RIA accounts.

This is one more means to Schwab Institutional's end goal of reaching $1 trillion in assets under administration by 2010, Mr. Grist said. Schwab Institutional has total clients assets of $388 billion as of Sept. 30, up 23% from a year earlier.

"We need to step up our game to yet another new level," Mr. Grist said. "One of the key parts of that (goal) is segmenting out the investment consultants and focusing on how we can help them grow their business, and then grow Schwab."

Taking a page from its RIA services, Schwab plans to streamline and automate the account management process for consultants with smaller institutional clients through a web-enabled platform, Mr. Grist said.The platform enables consultants to view and manage accounts as a group, rather than client by client. It also automates billing. In addition, Schwab will act as custodian of the assets.

Several consultants are using the new service, but Mr. Grist declined to identify them.

To build business, Schwab conducted an "investment consultant business management summit" last month in Pebble Beach, Calif. in which Charles Schwab, founder, chairman and chief executive officer, helped to host. A dozen representatives from firms that collectively advise on $120 billion in assets attended. Mr. Grist declined to comment on the guest list, but noted Schwab may coordinate more meetings in the future.

Mr. Grist said those attending were interested in reaching endowments, family offices and high-net-worth investors. They also want to know how to use technology to increase efficiency, he said.

"Everybody realizes there is more margin to be had," he said.

Schwab's new platform is similar to what a custodial bank might provide, but the price tag is significantly lower, Mr. Grist said. For example, a custodial bank might charge three to six basis points for custody and administration-like statements, as well as other services, while Schwab will provide that for free. Consultants using Schwab's service do pay for ancillary services such as the Advisor Web Center, in which Schwab helps design, develop and host the consultant's website. Schwab also charges for its portfolio management software products and settlement fees if consultants trade elsewhere and settle at Schwab. On the commission side, a broker might charge three cents a share for a 1,000 share trade, amounting to $30, compared with $9.95 for the same trade at Schwab.

Mr. Grist is heading up the consultant relations group in addition to his current duties. He also plans to hire consultant relationship managers nationwide, but declined to elaborate.

Schwab has offered a similar level of support to consultants of larger defined benefit plans — those with $10 million or more in assets — served by Schwab Corporate Services through a partnership with InvestorForce Inc., Wayne, Pa., struck in February 2003.