As brokers start to resemble investment advisers in the wake of regulatory changes that raise certain standards of conduct, advisers must sharpen their brand, the head of the nation's largest custodian for advisers said Tuesday.
“They're working hard in the eyes of the client to look like you,” Charles Schwab Corp. president and chief executive Walt Bettinger told the audience at the
Schwab Impact conference in San Diego. “The great challenge of the next 20 years for us in this industry is that ability to re-differentiate ourselves from those who are following your success and wanting to look and act and to appear to clients just as you do.”
The conference has drawn about 4,000 attendees, most of whom are independent investment advisers who custody their client funds with Schwab.
A Labor Department rule that would require financial advisers to retirement accounts to act in the best interests of their clients is scheduled for implementation in April. Its advice bar is at the same level investment advisers, who are fiduciaries, now meet, but it would raise expectations for brokers, who currently adhere to a less-stringent suitability standard.
The move toward a fiduciary standard will change the complexion of the advice industry, Mr. Bettinger said.
(More: A comprehensive, searchable database of advisers' fiduciary FAQs)
“In the effort to copy you, the end result might be 10-20 years from now that the entire industry will look a lot more like this one,” Mr. Bettinger said.
He added: “The whole investing world is headed toward transparency. It's headed toward fiduciary expectations.”
But that doesn't mean an immediate gain in business for investment advisers.
“I don't think we're going to see large market share movements,” Mr. Bettinger said. “Market share is just too difficult. People don't just give up market share easily.”
Instead, Mr. Bettinger said, there will continue to be downward pressure on fees.
On Monday, Commonwealth Financial Network became the latest broker to announce it will
stop offering commission-based products in retirement accounts.
Schwab Advisor Services provides trading, practice management and other services to 7,000 independent advisers. It has 26% of the custody market, housing $1.3 trillion in client assets in the third quarter.
The independent sector is likely to achieve “significant growth” through mergers and acquisitions rather than organically, Mr. Bettinger said, due to a sluggish economy.
“To grow, each of us has to win more business from other organizations to a greater extent than capitalize on new wealth coming into the investing population,” he said.
Bernie Clark, head of Schwab Advisor Services, told the conference audience the firm is targeting the $23 trillion in household wealth outside the independent adviser channel. Through the end of the year, it is offering incentives to brokers to go independent, including commission-free equity and exchange-traded funds trading for a year.
