Tim Oden Talks About Steps in Going Independent

Submitted by Brian.Lavelle on November 13, 2017


[How Can RIA's Grow Their Business?]

[Tim Oden
Senior Managing Director, Business Development Charles Schwab]

Everybody wants to be able to grow.  In this environment, scale is important. It helps advisors manage their margins, which is critical. And they often have a lot of underutilized capacity, and they want to be able to fill that. And so there's a couple things that we've been seeing from advisors that have been particularly effective when it comes to the idea of growth. First of all, we have a great deal of energy out there around consulting with firms about how best to work on the referral networks, how best to utilize your existing client base as kind of an extension of their sales process. And so there's a lot of white papers that we've written about that topic, and a lot of our business consultants that are working with advisors to train them on how to better utilize those referral sources. But another aspect of the growth that is really kind of an under-mentioned growth mechanism, and that is the acquisition of advisors that are coming out of the wirehouse space, out of the independent broker-dealer space that like the idea of independence, but don't necessarily like the idea of hanging out a shingle and being their own entrepreneur.  And so for those people that are looking for independence, there's a natural marriage with existing advisors that have the capacity to be able to add that staff, and in the process it lends scale to both of their operations. And so those are the two things that we hear most.

What's interesting for us is that there's a full 35% of the new business teams that are coming into our new business development efforts that are actually tucking into existing RIAs. And so it's not an insignificant percentage of the growth in this space when it comes to joining new business, and so that's kind of interesting and attractive.  I think that's the reason why so many advisors are now seeking out firms like Schwab to help them understand ‘How do I make myself more attractive to that group?' And, in fact, we've had a recent… as part of this conference, we had a prospecting event that was targeted about to bring people out of that wirehouse and banking environment, and bring them into the independent space. And about 50% of those people were looking to join an existing practice. 

Now, what role does Schwab play in that process? Well, obviously, we can play an introductory role. But in addition to helping existing advisors understand how to get themselves ready for that new advisor coming in, we also work with that new advisor to help them understand what are the key components that they should be thinking about to find a good marriage, because it is really a marriage, and you have to be aligned on cultural issues, on economic issues, on asset management and the vehicles that you use for your investments, the type of ideal clients that you're looking for—there's a lot of aspects that go into determining whether or not this relationship is going to pay dividends.  

So we work very closely with both sides to help them be smart about that process. And it's really… I heard somebody mention it's a trend. It's probably not a trend. I think this is a growing aspect of the independent space, and it's going to be here for a while. 

There is an ongoing interest for people that are looking to go independent but don't want to start their own business for this type of model. And I don't see anything that I can see in the competitive space that would suggest that that's going to wane over time.  I think we are getting more visibility into it, and as we get more visibility, it becomes a bigger part of the option set for people that are leaving that environment.  

[Tim Oden
Senior Managing Director, Business Development Charles Schwab]

The talent, in general, that are coming out of the wirehouses, that are coming out of the independent broker-dealers, generally-speaking, just continues to get stronger and stronger. And part of that is because they are more open to the idea of independence. They don't see another wirehouse as the only option available to them. And so as that happens, more and more quality come out and start kicking the tires.  And as they do, it resonates with many of them. Remember, some of the best talent within the wirehouse and banking environments are great entrepreneurs. They understand small business. And so it's natural for them to attract themselves to this model. They just don't understand enough about it. And so our job is to educate them, to let them know it's here, to help them understand what benefits are into it. That, then, gets their entrepreneurial juices flowing, and then the rest is history.


Listen to Schwab's Tim Oden, Managing Director, discuss trends in the RIA industry.

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