If Andrew Salesky,
head of adviser technology at Charles Schwab, is in the hot seat, he's not showing it.
The Schwab veteran, who took up his latest post in June, possesses an unexpected calm as he talks about Schwab's efforts to convince its 7,600 adviser clients that it hasn't lost its mojo when it comes to technology.
Indeed, the iconic financial firm remains the nation's leading custodian both in terms of number of registered investment adviser clients and assets under management, but a combination of fintech market changes, leadership adjustments and strategic miscues have shaken an almost religious confidence in Schwab.
"One of the perceptions they need to start combating is their focus on retail, versus supporting advisers," said Mike Giefer, an adviser with
The Johnston Group. "I'm hoping they come through in this regard. I don't think anyone wants to ruffle the waters, but we want to make sure they have the same commitment."
It's up to Mr. Salesky, who's been with Schwab for 23 years, to calm the waters.
Mr. Salesky contends that the company is, and has been, committed to adviser technology. He doesn't see himself as a captain assigned to course correct the ship, but more as a booster sent in to ensure advisers understand the company's technology goals and make sure his team delivers on them.
"I view my role as the key technology cheerleader for the team and making sure there's a clear story … that is compelling not just internally, but for our clients," Mr. Salesky said in an interview with
InvestmentNews.
Research firm
Cerulli Associates said the large U.S. custodians are on a level playing field these days when it comes to in-house technology for account opening, onboarding, trading and rebalancing. Where the firms look to differentiate themselves is with the extra pieces like performance reporting, CRM technologies and digital advice. That's the area where advice firms that custody assets with Schwab have complained about strategy.
"We have RIAs and multifamily offices tell us that they very often outgrow the capabilities of Schwab," said Donnie Ethier, Cerulli's director of wealth management research and consulting.
Mr. Salesky is ready to change that narrative.
Schwab's new adviser technology chief outlines priorities and challenges
Since stepping in as senior vice president of digital advisor solutions in June, he has already overseen some of the largest technology developments to come out of Schwab Advisor Services in recent years, most notably the long-awaited launch of its next-generation portfolio management software,
Portfolio Connect.
But will that be enough to satisfy the company's adviser clients?
Third-party software
Nine years ago, Schwab promised a cloud-based update to its desktop portfolio management software, PortfolioCenter, that would include multicustodial support and eliminate the need for third-party tools. But since that concept was designed, the fintech market has evolved to the point where advisers embrace their third-party software.
Schwab shifted away from its plans to build a multicustodial portfolio management system that would have competed with products like
Orion Advisor Services,
Envestnet's Tamarac and
Advent Software's Black Diamond even before Mr. Salesky succeeded Ed Obuchowski, who left Schwab in April to head Advisor Group's technology. But it was Mr. Salesky who pushed the team to get the system into the hands of advisers sooner rather than later.
(More: Schwab abandons plan to build multi-custodial portfolio management tool)
"What I brought was an acceleration to get to a place where we could share it externally," he said.
Free for some, but falls short
Portfolio Connect, rolled out in August, is tightly connected with Schwab's custodial platform, eliminating the need for daily custodial downloads, data integrations or reconciliation. It also will be free for advisers who custody exclusively with Schwab. However, it falls short of the company's lofty promise of a custom-built, multicustodial tool that would eliminate the need for advisers to pay for third-party portfolio management technology.
"It was going to be this all-in-one great thing," said Greg Friedman, founder and CEO of Private Ocean, an advisory firm with $2.2 billion in client assets that has used Schwab as one of its custodians for more than 20 years. "They need to get a better strategy articulated and then execute on it."
"In many cases, we like to say — doing the basics well is the new innovation."Andrew Salesky, senior vice president of digital advisor solutions, Schwab
Part of the adviser tech challenge for Schwab has been its turnover in leadership.
The leader of the robo-advice team, Naureen Hassan, was poached by Morgan Stanley in 2016. Soon after, the former head of adviser technology, Neesha Hathi, took over for Ms. Hassan, a move that placed adviser tech in the hands of Mr. Obuchowski, until he moved on two years later.
With the PortfolioCenter project now past them, Mr. Salesky can redirect resources toward Schwab's OpenView Gateway, the platform for supporting integration with third-party technology.
For advisory firms that work with multiple custodians, Mr. Salesky wants a "broad and deep" roster of technology partners to support their needs. Schwab recently announced improved integrations with Orion Advisor Services and Envestnet Tamarac and more are likely coming soon. It's a move to meet advisers where many of them have already moved.
Cam Goodwin, chief operating officer of
HawsGoodwin Financial, said his firm used to use PortfolioCenter, but now uses technology like MoneyGuidePro, Riskalyze and Junxure CRM integrated through Orion as the central hub. The firm's tools have worked fine with the existing connection to Schwab's platform, but he welcomes additional integration.
"I think getting our CRM to talk a little bit better with the rest of our systems would be our No. 1 goal," Mr. Goodwin said.
Doug Fritz, founder of
F2 Strategy and former chief technology officer at First Republic, called the move toward third-party integrations "a great call and a long time coming." He said Mr. Salesky is bringing Schwab Advisor Services back in line with what modern advisers like Mr. Goodwin want, and need.
It's ridiculous for any custodian to build its own multicustodial tools when plenty of technology vendors do it already, he said.
"Just integrate with the tools people are already going to use," he said.
Even if Mr. Salesky is winning hearts with integration, advisers remain frustrated by Schwab's choices around digital advice. When the company released its Intelligent Portfolios robo-adviser in 2015, it became the first discount brokerage to bring a fully digital robo-adviser to the retail market.
The product proved Schwab was capable of building a complete digital wealth management experience in-house, something no other discount brokerage or custodian had done yet.
Though some RIAs that custody with Schwab worried about competing with the robo for assets, others saw it as the best chance to modernize their firms and become more attractive to the millennial generation.
Three years later, though, the technology still hasn't fully crossed from Schwab's retail business over to Schwab Advisor Services. Though the custodian announced Institutional Intelligent Portfolios for RIAs when the retail product launched, it doesn't have the same features and doesn't fit seamlessly into existing workflows, according to some advisers.
Mr. Friedman said not having access to the full features of the retail robo-adviser has a meaningful impact on RIAs.
"When a client can go to Wealthfront or Betterment or Schwab's retail [robo-adviser] and click, click, click — and then go to an adviser's website and it's nothing like that — it puts us in a tight spot," he said.
Want more investment options
Mr. Giefer, who was an early adopter of Institutional Intelligent Portfolios, said the robo-adviser is still a work in progress.
Some advisers said they'd like to be able to automate trading and tax-loss harvesting for all clients, not just small accounts, and would like support for additional investment products.
"One thing we want to push for is for them to open it up to allow both mutual funds and ETFs to be in the same portfolio," Mr. Goodwin said.
So while Schwab's retail robo-advice product has been wildly successful — managing $35 billion in assets, second only to The Vanguard Group's robo platform — and the company has introduced a version that combines digital advice with live advisers employed by Schwab, some independent RIAs feel as if they have been left to fend for themselves.
"My perspective is they looked at technology innovation and said, 'We're going to keep it for our own clients,'" Mr. Fritz said. Meanwhile, the adviser network was "kept on its own island."
With much of adviser technology in 2018 centered around creating modern client experiences in line with consumer technology, Mr. Salesky said renewed focus on the adviser-facing digital advice engine is on the road map.
Mutual funds are coming soon, as well as the ability to open individual retirement accounts on Institutional Intelligent Portfolios, he said. Schwab also will introduce a digital conversion process in 2019 for advisers who want to move portfolios over to the robo.
"We continue to invest in the platform. It's an important part of our offering," Mr Salesky said.
His team also is looking at how to unpack some of the robo's underlying technology, like the rebalancing and investment management engine, and bring it over to the
custodian platform, he said.
At Schwab's annual Impact conference for advisers last week in Washington, Mr. Salesky articulated the company's technology strategy loud and clear.
(Watch: Schwab IMPACT 2018)
Advisers shouldn't expect buzzworthy new blockchain or artificial intelligence features. Instead, he told hundreds of advisers that the Schwab team is redoubling its efforts to improve the core functionality of the Schwab custodial platform and eliminate the need for paper wherever possible.
"In many cases, we like to say — doing the basics well is the new innovation," he said.
As he contemplates the challenges ahead, Mr. Salesky says with unabridged confidence: "There's no lack of commitment to this business."
