Independent Perspectives: How Schwab Helps You Launch and Evolve Your Firm

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Starting Your Own Firm: Schwab's Consultants Can Guide You Down the Path

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How do you help advisors as they are contemplating a path to independence?

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Scott Cohen

Director, Business Start Up Consulting, Schwab Advisor ServicesTM

SCOTT COHEN:  If you think about it, a lot of advisors have experienced running a practice, but maybe not launching a business. And because of that, sometimes the hardest part about getting started is just getting started. So the Business Startup Consulting team is there to lay the strategic foundation for the new business and get things underway. That really comes down to four core areas especially in the early stages.

First, is really understanding what is the client experience that that advisor wants to provide and how do they deliver that experience? And then assessing the options for independence based upon the type of firm that they want to have.

Once we understand that clearly, then it comes down to understanding the economics, not just of the transition but of running and operating a business on an RIA model.

Given the enormous ecosystem and the very mature ecosystem and the amount of third-party providers, the third area, then, is how do we sift through that universe, that ecosystem, to find the right set of providers for the firm that you want to have and can grow alongside you.

And then the fourth area, and we hear this a lot from advisors, is, ‘How do I communicate this to my clients?' So we work with your marketing provider, and, of course, Matt Faries' Transition team who you will hear from, to create a really buttoned up transition plan.

So I know that there's a lot of overlap during that period with Janelle's Technology team. Why don't I hand that over to Janelle to talk about what the tech engineers do.

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Janelle Ward

Director, Technology Consulting, Schwab Advisor ServicesTM

JANELLE WARD:  Thank you, Scott. And the technology consultants, which we call Technology Engineers follow that process, discover, plan, and launch. And we begin with getting to know the advisors overall business, and we're helping them, ultimately, think through what does that outline and plan for their technology and operations strategy and vision look like in alignment with the work that's being done with Scott and the Startup Consulting team. Then we move into assessing the technology that they need. That includes Schwab's broad range of technology and integration capabilities that are in place, designed to support the advisor's ideal client experience. And then we evaluate the integrated third-party solutions that are there to support the goals and the needs of the firm and the end clients.

And all of this comes together in a… just as one part of being larger transition and integration plan. And Matt will outline his team is supporting the broader transition plan.

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Matt Faries

Director,Transition Consulting, Schwab Advisor ServicesTM

MATT FARIES:  Sure. Thanks, Janelle. Yeah, so, essentially, we have a team of consultants, transition consultants across the country that once you've met with or discussed the vision with the Business Startup consultants and the tech engineers, our team comes into play. And, really, we're thereto help execute on the plan. And, essentially, we will evaluate and address all unique business needs based off of discussions with various business partners, put together that customized plan, and help you, as the advisor team, execute on that plan. And that within that plan, we're helping to ensure the client set up process, transfer process, what that looks like. And then, ultimately, helping set up training resources to make sure that you and your staff are ready to move forward once it's time to actually execute and launch your firm.

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How do you engage with a prospect advisor as they are considering a potential transition?

SCOTT:  It's often said that if you don't know where you're going, you could end up someplace else. And that's how we approach this. So we start by asking really good questions based on our experience, and we listen really hard, so we understand each advisor's unique business and their goals. And for Business Startup Consulting, that really comes down to two things. Number one is a firm design blueprint, which I'll talk about in a moment, and the second is a detailed economic analysis.

So let's start with the firm design blueprint. And a really good analogy is if you've ever tried to put a jigsaw puzzle together but without the picture on the top of the box, it's really hard. You can do it. It's just more difficult. So the firm design blueprint really functions as that picture on the top of the box. It's designed to pull all the pieces together so the advisor has the complete picture at the beginning of the process. And as you can see, we start with who are the desired clients? Who do you serve? What experiences do you want to create for them? How do you charge for that experience? All the way down to office environment, HR staffing. And we guide advisors through that process using the deep data that we have from our RIA Benchmarking Study.

And so we use this from design blueprint in two ways. Number one, it becomes a decision-making tool. So how do we bring that firm into focus and ensure alignment across all of the decision-makers? Number two, it's a communication tool. So how do you bring others along with the vision, right? So you may use this to talk to staff, to talk to third-party providers and specialists resources, and it will even inform how you ultimately speak to clients.

Once we're done with the firm design blueprint and we have an idea where we're going, now we want to create a detailed economic analysis based on that blueprint. So helping advisors understand revenue, understand expenses, not just transition expenses, but ongoing operational expenses, and even long-term practice equity value.

Then we move on to planning. And, really, that's just about making really good, informed choices as advisors prepare to set up and ultimately launch the firm. A lot of that comes down to sifting through that… as I mentioned earlier, that large ecosystem of specialist resources, so compliance, finance, HR and staffing, real estate, even marketing and branding. We want to make sure that we're helping advisors choose the right providers for their firm.

And then the final step is launch, where we bring that firm to life and execute on the plan. At the end of the day, advisors should feel like they have a clarity around the steps that they need to take to launch the firm, and they should feel confident in the decisions that they're making. And that's how the process works.

As I mentioned earlier, Janelle, our teams work really hand in hand, especially during this early phase to create the firm design blueprint. So if you don't mind, I'd like to hand it over to you for some additional thoughts.

JANELLE:  Thank you, Scott. And I love what you said, you know, we ask really good questions, we listen very well at the very beginning. And oftentimes the technology engineers are doing that right alongside the Startup Consulting team or meeting with the advisors. At the same time, we are getting an opportunity to hear the responses to very similar questions or the same question in the same conversation, which helps just move things forward in a much more seamless way.

So where does our team practically begin? In discovery, is getting to know the advisor's overall needs, honing in on the strategy and vision to support both the staff and the business needs, but, importantly, that ideal client experience. What are the clients used to getting in their relationship with you today? Where are there potentially some gaps in that experience? That's often where we spend a lot of time when it comes to technology, is looking at all the things that the advisor maybe isn't able to deliver, and look at the range of capabilities that exist both at Schwab and in the broader third-party tech ecosystem and universe to support that. And then we look at, well, how does all of this come together in alignment for the future and how the advisor will engage clients and prospects digitally?

And then we move into looking at Schwab's technology offering and its broad integration capabilities. You know, Schwab, on its own, we spent a lot of time emphasizing and spending time on workflows and the digital workflow capabilities that are available that allow the advisor in the business to become far more efficient, but also deliver a secure and meaningful experience for their clients through things like digital account opening and ease of moving money between accounts at Schwab and elsewhere.

And then we begin to take up a look and step back because we know that Schwab's technology is only one part of the advisor's larger technology ecosystem, and we start to explore those third-party solutions. And we talk about how Schwab enables really seamless experience for the advisor to have one integrated, seamless technology infrastructure for their business, and to deliver a fantastic client experience.

And those third-party solutions typically that we're looking at in the early stages are portfolio accounting, which delivers billing, reporting, often trading and rebalancing these days, and integrated branded personalized client portals, which are typically built right into the portfolio accounting software. We also talk about client relationship management as a really critical piece to the business. And then if the firm delivers financial planning as a service, absolutely talking about financial planning software, as well.

And then, lastly, you'll see the technology and operations blueprint. So all of this work in the discovery phase, in the planning phase comes together into this blueprint. Everything is detailed here. It includes an outline of the firm's strategy to support the firm and the client experience. It lists out the solutions that we've identified, those that are going to be critical at launch of the firm, at six months, 12 months, potentially beyond. And the, lastly, importantly, are all the considerations, which are the nuances of your business and of your client's needs that we need to factor in. And that might include things like the different services that you deliver to your clients, the different client expectations, number of accounts, different types of assets held in their portfolios.

So, to summarize, we start in discovery, spend most of our time probably in the planning phase, really getting the detailed plan right, and all of that in which is to support the technology and operations launch plan.

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What are some of the tactical things we may be doing?

JANELLE:  I think often there's this misconception that advisors have to have everything in place day one. They see these really nice fintech maps that are out there. They're wonderful illustrations and get a good sense of the different types of technology software that exist by category. It allows you to see all of the emerging solutions coming to market, which is very exciting. Those typically set… or, you know, deliver and serve a very niche client or niche service, which is not necessarily critical at the start of the business or a transition of the business. And the reality is most firms need a few key pieces of technology to run efficiently and serve their clients well, and those, again, are portfolio accounting, it could be trading and rebalancing as part of that, client relationship management or the CRM, and then very often because we see more and more today that advisors are delivering financial planning as a service, is the financial planning software.

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How do you focus on what is most critical to make the best decisions?

JANELLE:  Like any experience that we have today just as consumers and often the experience that advisors are delivering to their clients. We start with just what's important? What matters to you most? What do your clients need? You know, what is it that's going to make a difference? What's critical to keep and what do we need to add in order to complete the experience? So we can get there pretty quickly. And then we will help guide them to the right solutions to focus in on. We absolutely can talk about all the exciting bells and whistles, and sort of ancillary solutions that exist. If that's what an advisor or their team is interested in, we are there to help in any way we can. But we want to set them up for success right out of the gate, and get them focused on the tools that are really going to enable them to have the efficiency that they need to run and grow their business. But like, number one, help them to deliver minimum on the experience they're delivering today, but, rather, who we prefer to help them deliver and improve upon that experience in a digital way allows them to extend the client experience digitally beyond what they've been able to do in the past.

So we will look at the big funnel, the big universe of technology, narrow it down really quickly based on what they've told us is important to them and help them focus in on those few solutions that really are important day one, and maybe even through the next 365 days.

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What does the transition look like?

MATT:  And, yeah, you know, listening to both Scott and Janelle, first and foremost, you can hear there's a lot of discovery work that goes into this, a lot of pre-planning, and you, as the advisor, may be saying, ‘Wow, how am I supposed to coordinate all this and make sure that we execute on it.' And that's really where my team comes in. And we've been doing this now for a little over 15 years. And this is our day job, so we're not doing anything else. We're totally focused on the transition process, itself.

And so based off of that 15 years of experience, we've put together a checklist or a project plan, if you will, of all of the various pieces that the teams that we've worked with need to focus on and consider when moving towards this, quote, launch as we list here.

So, you know, first and foremost, we'll put together this transition plan for you, customize it based off of your model, based off the discussions you've had with Scott and Janelle's teams. And then we put together weekly calls, and we pull in business partners, we pull in vendors, we pull in, you know, whoever may need to be during that week, and make sure that we're hitting those priorities, answering your questions, all for the purpose of executing according to the timeline that you've set with us to make sure that you don't feel like anything is falling through the cracks, so to speak.

And part of this transition process for us, too, is making sure that we evaluate, essentially, not only your client needs, but your staff's needs, and underlying holdings. We do an asset review. We want to make sure that we understand how your assets, your client holdings, will map over to Schwab. If there is anything we need to get in front of prior to, we'll work with you on that. We look for lending needs. So if you have collateralized lines of credits that we need to consider, or any esoteric assets that we can get in front of.

And then we also have another team, our advisor conversion services team. These are the folks that will pull in that, as we put, it really get down into the weeds with the overall conversion process of client assets. So this team will work with you to understand how to set up the client accounts at Schwab, what the account attributes are. They work on mapping that information over, what you're able to send to us, and then they walk through that client set up and transfer process.

In addition to that, while they're doing this, their training, we have online training, we have training done through WebEx, and, essentially, we want to make sure that we get in front of that not only pre-launch, but then as we're going through that launch period, they're sitting down and working with you and your staff to make sure that everybody knows how to use the new system, so to speak.

So, like I said, we have a lot of teams that we work with, we help coordinate. And the end goal is to make sure that the transition goes as smoothly as possible, and there're no surprises, and things move forward quickly at the end.

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What are some best practices around making this transition?

Best practices are our engagement from the larger picture. And what I mean by that is making sure that when we set up these weekly calls, that those that need to attend, attend, that we don't skip weeks, that we, you know, are fully dedicated to the planning process because the more detailed we can get the better it's going to be, not only for you, the advisor, but also your clients.

And, you know, oftentimes, too, Adam, we hear the, ‘Hey, you know, our business is plain vanilla. I'm sure that you have it. We don't need to map over the assets. I can't imagine you wouldn't have this set up.' And I think as you and I have talked about in the past, anytime you hear plain vanilla, that's sort of red flag from that perspective, and we just want to make sure that there isn't anything that might surprise us when that transition happens.

So really it's all about the engagement, the planning, and then, you know, full disclosure on what aggregate holdings are, and how that maps over.

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How can we help advisors choose between the build versus join model?

SCOTT:  I think the definition of independence has really changed and evolved over the years. It used to be that you went independent and you hung out a shingle and formed your own firm. And that's still very prevalent today, but it is a question that we often get, or actually even ask in the early stages of discovery. So, number one, do I go it alone? Meaning do I build and operate a firm on my own with the help of resources, let's say, from my team and the rest of the resources is Schwab? Number two, do I maybe partner with a firm who has prepackaged much of what I'll need to launch and then to operate, or even, three, join an existing firm? And if you take a step back and you look at what are the reasons that most advisors leave, where they are, so if you leave a wirehouse, even an independent broker-dealer, that the two main reasons are either the advisor doesn't feel like they quite see eye to eye with senior management and the policies that are created as a result, and then, number two, is the culture, they feel like the culture is not a good fit.

So if we look at the movement of advisors away from a captive or semi-captive model, still a little bit more than 50% launched their own where they are the senior management, and they can define the culture on their own, and a little less than 50% are seeking something else. They're looking for resources, and infrastructure, and scale, and maybe even culture. So here's the good news. The good news is that there's not really one right answer to the question. It really comes down to what does the advisor want? What do they want to focus on themselves? And what kind of experience do they want to create for their client? As I mentioned earlier, the RIA model has a really tremendous ecosystem with lots of choices. And as it turns out, very few dead ends. So some advisors come to us and they are clear-eyed, they know exactly what they want and how they want to go independent. Candidly, others come to us and they don't know what they don't know what they don't know yet. And that's okay, that's natural. We can help advisors clarify what their preferences are and then educate them on the options so they can make informed choices. At the end of the day, there's so many choices out there, advisors shouldn't let the fact that they might not know, they aren't sure what they want and how they want to go independent. They shouldn't let that deter them from exploring the options with us.

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What are some of the things you are doing to make things as smooth as possible?

MATT:  From the pre-planning perspectives, so that's meeting with Scott's team, meeting with gel Janelle's team, meeting with my team, not a ton has changed. It's always been really virtual for the most part. And so that was an easy sort of shift, if you will.  We're still doing the weekly calls. We're still managing the project plan. The biggest change as everybody can imagine is a bigger shift to digital tools, right? So whether that's e-sig, digital process, what that may look like. So we've been really focusing on that, and the Advisor Conversion Services team, those are the folks that will help, you know, with that set up process, and making sure that the advisors and the staff know how to use that process and can connect digitally with their clients to help expedite that process. And, quite honestly, you know, with clients being at home more, we've seen the process be even more effective.

And, yeah, I would say in addition to that, the training that we do, the WebEx, the bridge lines, if you will, we keep an open line, typically, during that launch process, so that if your clients need additional hand-holding, if your staff has questions, you know, we're readily available, we want to make sure that we get to your answers right away. And, honestly, if you need to pull us into client meetings, we're available to do so.

So, you know, really, as you can imagine, a big shift to the digital process, but other than that, the planning has been, you know, pretty standard from what we've seen in the past.

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How are clients technology needs changing?

JANELLE:  We are seeing a lot of positive impact. Crazy year. I think most of us, you know, wish it away at this point, but I think we'll look back and say there were some really great things that came out of it. And one of them being that we all, whether personally in our relationships or at a business level have embraced tools that were probably always available to us, but we weren't necessarily needing to lean on as often as we do now. And so we're seeing advisors embrace screen-sharing. We're seeing them embrace co-browsing, and leveraging video to try to sort of bridge that divide. I mean, it is certainly hard to replace sitting across a table from someone, sharing a meal, or having a cup of coffee eyeball to eyeball, but it's pretty amazing because what the video in our homes allows us to do is sort of an inside look that we haven't been able to ever accomplish before. And so advisors are now getting a chance to see into their clients' lives in a much more intimate way than they have in the past, and it's helping to even relationships both with clients and prospects. And I know, just personally, my mother-in-law lives here and her financial advisor has a wine-tasting event coming up for... in small groups that she's been talking about for a while, she's invited us to participate, but she's met with him, and what has been really needed is my son's walked into her room and the middle of her being in a video conference with the advisor. And he had a chance to, you know, see her grandson in a not typical encounter for him where she would be taking her grandson to a business meeting.

And so we're seeing things like that go a long way. And so advisors are now looking at the technology that they're selecting and making investments in for their business and trying to identify how does it connect with these different tools and how does it enable me to reach my clients better and more effectively digitally than I did in the past. And so the screen-sharing really simply is helping advisors to review financial plans, review goal updates, and fill out… complete paperwork, as Matt was outlining, and even really on a personal level, just share videos and photos. So I think we're seeing a lot of positive impact from tools that already existed, and everyone's just doing a much better job embracing them today to foster relationship-building.

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How is your team addressing concerns around transitioning?

MATT:  that's one of the biggest questions, right? How do I know that my clients will come? How quickly does this happen? You know, what does this look like? know, we see 85- to 90%. It depends, certainly, on the relationships and the model, itself, but, on average, that's what we see. We tend to plan out. Once the firm launches, we say it can take up to perhaps three months, but the vast majority comes within that first month. And, really, what's important is the planning piece, right, and how we execute on that, and how detailed we get and what the client meeting strategy is going to be. And, oftentimes, you know, Scott's team will help with that client communication and strategy. And, you know, if we execute on that, you know, within that first month, we're seeing, you know, the vast majority of accounts get set up with assets moving over.

SCOTT:  One of the things we hear from advisors in this process are the unknown unknowns. So what are the things I don't even know to ask about? And understanding that the role advisors are used to playing, there's a reason for this, right? They're used to playing the expert. And it can be unsettling to not have all the answers about how do I go independent, how do I launch a business, and how do I move the book of business with the best client experience possible and get up to business very quickly? And that's why we've structured the process the way that it does. And I'm in the business 27 years.  I spent my first dozen years as an advisor and I moved twice. So I've been through a move myself. And in the last 15 years, I've helped move hundreds of advisors. And I can tell you that the biggest concern is will my clients come? And I think Matt addressed this, right? It's 85- to 90% of what the advisor wants to bring with them is going to come, because sometimes you change and you want to leave some things behind on purpose. Understood.

But where transitions tend to fall down is in communication. And Matt referenced this earlier about if we have a scheduled call, let's keep the scheduled call. Let's make sure that everybody attends the call that needs to be there is very important. And so some other custodians tend to outsource this piece of it. That's one of the reasons why we do this all in-house, is because where there's gaps in communication that's where something can go wrong. And so it's really important to make sure that we have a clear and articulate understanding of what we're doing and that we over-communicate it at every step during the way so that there are no surprises, and that everyone has a good experience.

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What piece of advice would you give to those thinking about the path to independence?

SCOTT:  Schwab actually surveys advisors after they move. And one of the regular pieces of advice that advisors give other advisors that are considering a move is just do it, do it soon, do it now, don't wait too long. But, you know, I'd add that a good decision is better than a quick one. And I would say to begin the process early, so ask questions, talk to your business development officer, talk to us on the Startup Consulting team, create a firm design blueprint, just get a sense for where you're going. And it doesn't mean you have to execute on that move today. It means that you're beginning the planning stages, much like a good advisor will work with a client and say, ‘Where are you today? Where do you want to be? How do we work backwards to get you there?' Start the process early. That way when you do put the plan in action, you feel like you've got a really solid plan, there are no surprises, and you can anticipate how all of those pieces of the puzzles start to come together.

Janelle, I'd asked you the same thing. I'm wondering if you've got any advice that you might give folks especially when looking at the wide variety of technology options, which can be kind of daunting, any questions that you might have for… or I should say, any answers you might have for advisors in those early stages?

JANELLE:  Yeah, and I think this is a little bit more general that applies to tech, but it applies to everything, and it's bring other people along with you to the extent that you can, whether that's trusted team members, helping you to sort through some of the decision-making and evaluating the options. To the extent that you can, invite your trusted clients, maybe a client advisory board, if that's permissible, inviting them in to offer some input. And trusted partners, you know, take advantage of the depth of resources, experience, and the support that you have at Schwab across startup consulting, technology consulting, transition planning, the conversion team and transition management. You know, we're here as an extension of your team. You don't have to go to alone. We're here to help.

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Information as of October 29, 2020.

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