Schwab expands wealth unit, raises RIA referral cutoff

Charles Schwab raised the minimum assets required for referrals to independent registered investment advisors from $500,000 to $2 million over the past year, expanded its in-house wealth advisory teams and began permitting its advisors to trade on a discretionary basis. The changes affect advisors in Schwab’s referral network and have prompted questions from some independent RIAs.

The Westlake, Texas-based custodian provides custody, trade-clearing and related services for about $5.5 trillion in client assets and maintains a referral network of more than 16,000 RIAs. Jonathan Beatty, head of Schwab’s advisor services unit, told reporters the firm received one complaint from a network RIA in the past 12 months and resolved it “in about 15 minutes.” He also pointed to a broader market opportunity, noting roughly $37 trillion in assets sit outside the RIA industry.

Former Schwab employees and industry consultants described the referral-threshold increase and the discretionary-trading change as steps that could retain more clients in-house. Tim Welsh, founder of Nexus Strategy and a former Schwab employee, said the changes redirect client flows that previously went to independent advisors and called the internal advisory business a clearer path to growth.

Schwab executives have discussed plans to use artificial intelligence to enable in-house advisors to serve less-affluent clients. CEO Rick Wurster indicated earlier this year that the firm intends to lower the practical threshold for a “direct relationship” with a Schwab advisor, which previously started around $1 million in investable assets.

At a recent investor event, Schwab executives said the firm will expand the physical presence of wealth advisors to 30 office locations by year-end, up from four, to strengthen local relationships. Neesha Hathi, head of Wealth and Advice Solutions, said the in-market advisors will target affluent clients in selected regions.

Schwab is marketing new technology and services for independent advisors as support rather than competition. Beatty highlighted AI tools designed to simplify data transfers between systems, automate administrative tasks and provide fast answers about Schwab policies. Schwab also added a team of ultrahigh-net-worth ambassadors to assist RIAs with complex banking, trading and investing needs for wealthy clients.

Last year Schwab launched Advisor ProDirect, a paid program that offers back-office support and a dedicated coach for participating firms. About 20 advisory firms have enrolled and Schwab reported a backlog of advisors seeking admission.

The firm’s broader revenue streams have drawn scrutiny. Large wealth managers, including Schwab, earn revenue from cash-sweep programs that move uninvested client cash to banks for lending. A series of lawsuits in recent years has alleged firms retain excessive cash-sweep revenue. At the investor event, Wurster said Schwab provides many ways for clients to move money into higher-yielding investments and that the firm makes cash options highly accessible, adding, “We couldn’t make it easier. We couldn’t promote cash options more.”