Schwab Private Client Aims High

by Caroline Maxwell, Investors offshore.com

12 June 2001

Having established themselves as one of the leading lights in the world of online brokerages, Charles Schwab have decided to try their hands at something new- financial advice for high net worth individuals. In a bold move, which has surprised many and alarmed more, Schwab recently launched a new wealth management service, Schwab Private Client, aimed at those with more than $1 million in investable assets.

High net worth individuals certainly constitute a lucrative target market- according to a recent study by Merrill Lynch and Cap Gemini Ernst & Young, they control over $27 trillion worldwide. Their custom is particularly coveted by financial service providers because their assets tend to be more diversified, and on the whole they tend to stick with an advisor once chosen, unlike the more fickle retail investor. However, there are doubts among banks and traditional full service brokers that a discount broker will be able to meet the complex needs of the rich. 'The Schwabs and Fidelitys made their names and fortunes on scalability [of basic services]' said the chief investment officer of one leading US bank,'but high net worth investors won't stand for any prepackaged products.'

Independent financial advisors are also bristling at the move. The brokerage has traditionally had a lucrative relationship with advisors, referring over $10.5 billion in assets to investment professionals through its AdvisorSource referral programme. Now that it has decided that it wants to be directly involved in wealth management, Schwab Private Client looks to have something of a turf war on its hands. US based financial planners are sceptical about the organisation's claims to be partners with independent practitioners, and are starting to see the organisation as a potential competitor.

Schwab Private Client was introduced in Los Angeles, Atlanta, and Houston late last month, and there are plans to launch the service in three more US locations over the coming year. However, the move away from the retail investor, and towards the lower tier of the high net worth market seems to be part of a wider international initiative in the wake of the recent trading slump. In February of this year, the company's UK arm announced that it would be taking the popular Schwab brand to the mass affluent, and offering a range of new services in order to leverage more value from existing clients, and attract newer, wealthier ones.

Recommended