Schwab: Turning the Key

From Registered Rep:

Charles Schwab’s new advisor “franchisee” program, which was announced in February will be rolled out at the end of this year, aims to hire financial advisors with entrepreneurial drive, but not too much entrepreneurial drive. The franchisee program would operate out of individual branches, turnkey operations largely funded by Schwab, located in areas that are underserved by the company’s existing network of employee-staffed offices that cater to retail investors, Chief Executive Walt Bettinger said during a conference call convened to talk about the program Thursday, April 20.

Schwab plans to sweeten the deal by providing 25 to 50 “seed” clients for the advisor, and a “significant” amount of training and field support, Bettinger said. There would be no distribution of third-party or off-platform products, he added. The products would be the same as offered at other Schwab operations, and at the same pricing.

To determine whether the plan works, Schwab will open control branches in different geographic locations that have similar demographics to those of the independent branches, Bettinger said. Schwab assumes that the independent branches will generate more wealth than the employee branches that are designed to service existing clients, “but we may be wrong,” he said. The overall goal is to diversify Schwab’s ability to acquire new households. About half of its new clients currently come from referrals, a third are generated by advertising, and the rest are produced through corporate service programs such as 401(k) plans.

The way I see it? This is a move to pick up easy assets. Edward Jones, Raymond James, Ameriprise, and even LPL will be the targets. Small town operations are usually the most profitable too. If you want to read more, there are some great details on the economics of the breakaway broker buried at the bottom of the article as well. Go fish.


New Schwab Franchisee Program Would Keep Advisors On Tight Leash – Registered Rep

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