A Decade Since the Financial Crisis Began, Schwab’s Bernie Clark Champions the Rise of Independent, Fiduciary Advice

Speaking to more than 5,000 attendees at Schwab IMPACT®, the largest and longest-running event for independent advisors, Bernie Clark, executive vice president and head of Schwab Advisor Services™, pointed to the industry’s trajectory of growth over the past decade and underscored the critical importance of independent registered investment advisors (RIAs) in helping lead investors out of the depths of the financial crisis.

“When clients didn’t know what to do, you provided a path,” said Clark. “You not only saw clients through some of the scariest financial times in this country’s recent history, you were a refuge when trust was broken.”

According to the latest findings from Schwab’s Independent Advisor Outlook Study (IAOS), released today at IMPACT, during the last decade, over a third (39%) of independent advisors report that they have emphasized their fiduciary duty, while maintaining transparency with their clients (72%).

“When clients were skeptical, you gave them confidence . . . when the pendulum swings, in either direction, your work matters . . . at a fundamental and a human level,” said Clark. “Fiduciary means something. You have demonstrated that for years, and there is no doubt you continue to set the standard for advice in the industry.”

According to IAOS, the global financial crisis also affected advisors’ firms in several other ways, including changes in the use of technology (61%) and investment products (48%) and the frequency with which they communicate with clients (41%). On the other hand, most advisors report maintaining pricing (78%) and staying the course with respect to their investment philosophy (71%) over the past decade.

Industry success brings competition

The growth and maturity of the independent advisor industry has brought new levels of competition among independent firms. According to IAOS, two-thirds of independent advisors say differentiation is essential.

A majority of independent advisors feel that, when compared with wirehouse advisors, they are differentiated when it comes to acting in a client’s best interest (95%), understanding a client’s specific needs (84%), and understanding and supporting a client’s entire financial life (83%).

Among the ways in which RIAs say they differentiate from other independent advisors are client service and understanding clients’ unique needs. In each case, two in three advisors feel there is differentiation.

There is also notable competition when attracting and retaining talent. In the past five years, a third of advisors say their firm has hired someone directly from another RIA firm. One in five advisors say someone in the firm has left to work at another RIA firm.

When competing for talent, compensation is seen as the most important factor for attracting (61%) and retaining (53%), followed by clear advancement opportunities (31% attracting and retaining), and flexible scheduling (27% attracting; 31% retaining).

Market expectations and client portfolios

Most advisors (70%) expect the S&P 500 will continue to go up the next six months, but this expectation is tempered by real concern about an eventual downturn. Seven in ten advisors (71%) report that they are somewhat or very concerned about the possibility of a downturn. Clients are mirroring this concern: eight in ten clients (82%) worry about the possibility of a downturn and four in five advisors have had to reassure at least some of their clients in the past six months.

Among factors perceived by advisors as having a negative impact on the markets over both the short and long term are tariffs on imported goods, followed by disputes over trade policies and the rising interest rate environment.

Looking ahead: Tapping into trends

Firms are turning to their next-generation advisors for insights in several areas, including technology, marketing, and firm culture.

Forty-two percent of respondents report that young advisors are most likely to advocate for using new technologies within firms, followed by operations staff (39%), client-facing staff (30%), and older advisors/employees (28%).

About the Independent Advisor Outlook Study

The Independent Advisor Outlook Study is an online study conducted for Charles Schwab by Logica Research (formerly Koski Research).

Logica Research is neither affiliated with, nor employed by, Charles Schwab & Co., Inc. The study was conducted from August 24 – September 12, 2018 and reflects the responses of 783 RIAs who custody their firm’s assets with Schwab. Participation is voluntary. A detailed report on the Study is available here.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity. More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube and LinkedIn.

Disclosures

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

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Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading, and support of Schwab.

Independent investment advisors are not owned by, affiliated with, or supervised by Schwab. For informational purposes only.

©2018 Charles Schwab & Co., Inc. (“Schwab”) All rights reserved. Member SIPC.

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