Discover a model designed for growth and scale

Matt Ackermann: Good afternoon and welcome to today's webcast, Transform Your Practice: How You May Be Able to Scale Your Business to the Next Level. I'm Matt Ackermann. I'm the Director of Multimedia here at InvestmentNews. I really like to tell people I have the fun job at InvestmentNews because today is no exception, because today I'm sure we've got an amazing panel of experts getting ready to talk about scale.

Matt Ackermann: Now I know to some of you on this call, scale is a four-letter word. It's a fiveletter word, but you know what I mean. Regardless the number of letters, scale is an interesting goal for everyone listening today. Advisors want that magic bullet that's going to help them grow and expand their business. Everyone listening today [inaudible 00:00:44] is an entrepreneur. We've even assembled an amazing panel to talk about some potential strategies for all the great entrepreneurs that are looking to grow and to expand their practice.

Matt Ackermann: You see, you want growth, but you also want a new approach, kind of that new path for growth, because maybe you've tried some other strategies. Maybe you're frustrated. Maybe you want a run an independent practice, but you want to be armed with support. You see, I've had the pleasure to travel around this great country and meet a lot of great advisors that feel trapped. Some of you listening today are trapped by a large employer where you don't feel appreciated or listened.

Matt Ackermann: That was one of the reasons we are so excited to do today's webcast a little bit after hours. We could make sure to get some folks that are on the employed side to hear some of these great strategies and tips. Maybe you don't feel appreciated by that employer, or maybe you're already independent, like my good friend [Shawn Indiana 00:01:36], who's literally trapped by independence and tried to do everything on his own in a small office.

Matt Ackermann: Today I'm excited to talk a little about a different platform, Schwab's independent branch model, which is resonating with advisors from all channels. Today I'm also excited because we're going to examine why more entrepreneurs and visionaries are taking a unique approach to independence to help them ramp up and potentially turn their practice into a surging business.

Matt Ackermann: But I want you to get to know this first and foremost. This is your webcast today, and I'd love to hear from you. I've got questions and I've got comments, and I could sit here all day talking to this great panel, but I want to hear from you. If you have questions and comments, don't forget to put them in to the terminal that you're listening through and to. Whatever that question may be, we're looking to answer for you today.

Matt Ackermann: With all that out of the way, let me get started here. Let me introduce our terrific panel, and then we'll dive into all these together. At the end, we'll make time for more of those questions, so we can discover together some great strategies to help you scale your business.

Matt Ackermann: I'm joined today on this call by Craig Taucher, the Senior Vice President of Independent Branch Services of Charles Schwab; Christine A. Baker, the Managing Director of Franchise Sales, Charles Schwab; and Ron Endsley, an Independent Branch Leader at Charles Schwab.

Matt Ackermann: Now, Craig, I'd like to begin by chatting with you a little bit to examine the big picture. If you don't mind, let's look at the problem a little bit here. Why do so many advisors today feel stuck by their current situation, whether it'd be on that independent island we were talking about or maybe feel stuck an employment process right now?

Craig Taucher: Matt, thanks for having me on the call today. Yeah, we hear that all the time from financial advisors. They feel like they're stuck on an island. But you'd mentioned it earlier; folks that are in the independent space, they feel like they're all things to all people. They're chief cook and bottle washer. They have to deal with their technology; they have to deal with their real estate.

Craig Taucher: They have to try to figure out how to do their own marketing. They try to have to figure out how to get to the client acquisition and use social media and all those different pieces. Some of their broker-dealers give them absolutely no help whatsoever. Trying to get through supervision and compliance to get some of those things done is a huge challenge for them.

Craig Taucher: Then you look at the wirehouses and you look at the regional model, and they just feel there's a lack of support. They want to do different things. They want to individualize themselves in the marketplace, whether that would be through marketing or social media. They want help, they want to be able to hire their staff and do certain things, and their firms are just not giving them the support. Ultimately, everybody says, "You know what? I feel like I'm on an island. I can't get any help." Matt Ackermann: That's so interesting because those are the words: "I'm on an island, and I can't get that help and support." The advisors really are looking for that best of both worlds. They want that support you're talking about, but they want independence. How can another model ... Maybe that Schwab IBS model really offers that best of both worlds.

Craig Taucher: Yes. We feel, Matt, that we created a very, very unique model in the industry by creating a franchise model. We literally turnkey everything for our franchisees. We go search the real estate, we create a turnkey office, we find the perfect location. Ultimately, we give all the support of Schwab. What you get is you get the technology; you get the marketing that I mentioned earlier.

Craig Taucher: You stay at the center of the relationship, you get to leverage all of the Schwab platform, all the pricing of the Schwab platform, all the support, whether that would be the trading platform for folks that are active traders, investment management, investment advice, marketing support, all the different things that folks are looking to do to build their business. At the end of the game, whether it's 15 or 20 years down the road, you get to sell that franchise, you get to sell that business.

Matt Ackermann: I just want to take a little bit of a half-step back here, Craig, because some folks in our audience maybe listening in might not know Schwab IBS. They know Schwab, they know the brand, but talk to me about how does Schwab IBS jive with Schwab? Like I said, many independent advisors may already be using it.

Craig Taucher: Sure. At Schwab, we have actually three different models. We have our employee model, so for folks that want employee experience, to go to the office every day, have some of that, for lack of a better word, security, whether that would be the salary, the opportunity to just walk in an office, get the benefits, those types of things. Our company-managed branches are a great opportunity. Those financial consultants have great careers.

Craig Taucher: You go to the opposite end of that, and for those people that really do want to be chief cook and bottle washer, those people that do want to brand themselves, we have the advisor services model, which is a fantastic platform, and it's great for folks that want to do the investment management, for folks that want to all the different pieces and brand themselves.

Craig Taucher: Independent branches sit right in the middle of that. For those folks that don't want to be employees anymore, they may have 15, 20 years of experience, but they really don't want to go on that island, they don't want to do all the different things that somebody would have to do at advisor services, to grow their brand, to build their business, they want to turnkey it, use the Schwab brand to ultimately drive scale.

Matt Ackermann: Are you guys seeing a lot of advisors taking this leap, getting off their island and joining you on this great peninsula? How many advisors are making the switch and joining with you guys?

Craig Taucher: Matt, at this point, we have 50 offices across the country. We have a very strategic growth plan where we're looking for talent and we're looking for the right talent in the right marketplace with the right real estate. Unlike a lot of other independent offers, so to speak, where they're trying to open as many offices as possible or bringing as many financial advisors as possible, we are very, very strategic in the growth plans. We're very, very picky on the markets we go into, the people we make that offer to, and ultimately the real estate.

Matt Ackermann: You must be reading my mind because it's interesting because being the skeptical journalist that I am, what jumps out to me, and I imagine a lot of advisors, is how is this model different from some of these other folks out there, different than, say, a rollup model that we're seeing some firms out there use to attract advisors?

Craig Taucher: Yeah. Rollup models are great, and that's especially true for Schwab advisor services, RIAs that are rolling up and building their businesses to create scale and leverage and try to do that by bringing their assets together, bringing staff together. A great opportunity.

Craig Taucher: This is for the person that doesn't want to be part of a rollup. This is the person that wants to be the owner. This is for the person that wants to run their own shop, may have two or three, maybe four employees, that's it, but ultimately use the whole back office of Schwab to grow. It is a very, very different offer than a rollup, a very, very different offer in the marketplace.

Matt Ackermann: We started this conversation with my big open talking about these entrepreneurial advisors. They want these strategies for growth. Talk to me about how this is good for that advisor. How is this model good for that entrepreneurial advisor so they can really think about scaling and growing?

Craig Taucher: The first one, Matt, is growth. Our model allows a much bigger front door. For most financial advisors, they know they work with a certain type of client, and that's the person that ultimately wants to hand over their situation to that financial advisor. Our model opens the door to all different types of investors, for those that do want total help, to hand over that relationship to our independent branch leaders or franchise owners and they basically give them all the different advice, go detailed financial planning.

Craig Taucher: But there's a lot of other investors out there such as active traders. You can bring those people into your practice, for those folks that want a little bit of advice, for those that are do-it-yourselfers that just want a great platform like Schwab, and they ultimately just want the technology to do that. You can be attractive to all those different investors, bring those into your practice, and ultimately get compensated on those.

Craig Taucher: The second is scale, and I've mentioned that many, many times. We know how hard it is to grow a business. Most independent financial advisors, if they're growing at $3 million to $4 million a year, they're doing great. For those that are wirehouses growing at $10 million a year, they're doing fantastic. In our model, we've shown how we can grow it at four times that amount by using the Schwab brand, by using our experts in the back office, by using our technology. Ultimately, it creates total scale.

Craig Taucher: The third one is focused on relationships. In our model, you don't have to do all the investment management. Your job is to do the financial planning, to tell the story, bring in new assets, and take care of your relationships. With our model, it allows you to ultimately scale and not handle a hundred or 200 clients, but 1,000, 2,000, 3,000 clients because of the way we built the model.

Craig Taucher: Lastly, and most importantly, it's that technology and infrastructure. We know how much that's changing. Independent broker-dealers are having a tough time keeping on top of the technology. It's very hard for people on a local basis to make investments that's needed. Again, the infrastructure, I've mentioned it several times, we hear it all the time, and it’s about marketing. It's about getting your name out there. It's letting clients know that you're there and you can help them. We have turnkey marketing programs and a whole marketing staff that can get your brand, combined with Schwab's, in the marketplace.

Matt Ackermann: Craig, thank you so much. I'd like to switch gears here for a moment. I had the pleasure of going down to Texas at the 12th IBS conference earlier this year. It was amazing to get to meet not just so many advisors that have already joined this movement with Schwab IBS, but so many raving fans. To me, it's one thing to hear someone like Craig, who's so eloquent, so driven, and it's fantastic to hear all about the platform from him, but there are amazing advisors nationally that are using it. I'd like to hear directly from one of those advisors now.

Matt Ackermann: Rod, you've been an advisor for 32 years, and you've seen it all. But only three months ago, you decided to give this Schwab IBS model a try. Tell me why. What drew you? What made this such a great decision, for you to join Schwab IBS?

Ron Endsley: Thank you for having me on today. The answer was a multitude of things that are happening in the business today. Craig really covered them all really well. But from my personal experience over those 32 years, I've been with three regionals and all were just really, really good companies, client-driven, relationship-driven, and a few years ago, I joined a wirehouse and thought that would be the best way to really, as technology has changed, the banking relationships with brokerage firms have changed, would be a good way to serve clients. For me, that didn't work out so well.

Ron Endsley: One of the things that really kept bothering me was we were incented to do things that were good for the firm, but not necessarily for the client. Another thing was because of legislation that has come and gone, we kept telling that 150 to 200 clients would be all that we would probably be able to handle, unless we were teamed up internally.

Ron Endsley: A few things like that got me looking at the industry. Being well aware of the pricing compression that was going on, I really started doing my due diligence. One thing that kept coming back was the Schwab name. Everybody I would talk to say, "Well, they have a great name." Of course, that was my personal opinion, too. I started the investigation into the franchise, and it's everything that I thought it would be and it's everything that I was told it would be.

Matt Ackermann: It's so interesting because I think, Ron, you're hitting on something that a lot of people in the audience are feeling and seeing at times. They've been in one platform, they've tried another, and they've reach that point ... I'm going to use a sports analogy here. You were like that great free agent before you joined Schwab IBS. What was the tipping point that led you, ultimately, to become a Schwab franchise owner as opposed to doing something else or staying at a wirehouse? What was that tipping point?

Ron Endsley: Well, again, the Schwab name was the primary driver, but the business model then followed. I loved the opportunity to just get paid on assets without having to worry about anything but the client. The compensation here is just really basic and paid on the amount of assets that I bring to the firm. It's real simple.

Ron Endsley: In my previous life, the compensation package was actually about 70 pages long. I could never figure out if I was adding value or it was taking something away from me. A lot of people were just extremely confused with that model. This was just truly refreshing because it was going to allow me to do what I like to do, and that's be in front of clients and meet people and have the confidence of knowing that we absolutely represent, if not the best value, certainly one of the best values available to them today.

Matt Ackermann: It makes so much sense to me, but why not just go fully independent? Why not just switch gears and become an RIA in all this? What would motivate you not to choose being an RIA and instead go with this model?

Ron Endsley: Good question. I thought about that and explored that, but then you have to be hiring your own experts and you have to be in control of virtually everything. One of the things that really enticed me about the Schwab franchise model is that you have a lot of professional team members assigned to your branch, but they're Schwab employees. They're not my responsibility. But they are employees of Schwab assigned to us.

Ron Endsley: The national marketing is unparalleled. I mean it's just really great. Then I found out that they also had local co-op advertising that they share in, and that was very interesting to me. Then, of course, the turnkey offices Craig mentioned. I mean we literally walked in and all we had to do is go to work because everything was here ready to go, and the public has just loved it.

Matt Ackermann: That was going to be my next question, that response from clients, both your existing clients and from the community that you're in. What's the response been like?

Ron Endsley: The response has been just really great. Existing clients, of course, that we had great relationships with, if they weren't familiar with Schwab, they sure are now, and they like the experience. Other people in the community have come up to use and said, "Boy, Schwab's really a great firm. We're so glad they're open in town. Thank you for opening an office here." Those are existing Schwab clients. Frankly, many of those had Schwab accounts, of course, but they also had accounts elsewhere. Now that we're here, they're consolidating into Schwab from other brokerage firms.

Matt Ackermann: Absolutely. This is a model, as Craig started talking about for everyone, that leads with support, it grants that independence, but it also, to Ron's point, brings a legacy here, and that's amazing. Ron, thank you. Just some really incredible insights there and a great story. I'm sure we'll come back more with questions from our audience that they may have.

Matt Ackermann: That reminds me, [inaudible 00:20:21], just a reminder. This is your webcast. I know I've been stealing some of your questions throughout my conversation there with Ron. Someone had said what's the response been like from Ron's clients, and I appreciate that question. Please don't hesitate to type in more questions so I can steal them, or we can ask them for you guys. We're excited to get more of your questions in a minute.

Matt Ackermann: But before we head to Q&A, I'd like to pivot here for a second and chat a little with Christine Baker. I've had the pleasure to get to know Christine over the past year, as she's taken me through this amazing platform. She's always a really great interview. Christine, thank you so much for your patience, but we always save the best for last.

Matt Ackermann: Now, Christine, you heard Ron's story a little bit. Tell me why does this model resonate like this across the industry and across the country through great advisors like Ron?

Christine Baker: Thanks, Matt, and thanks for that warm welcome. I think, and this is going to sound a bit trite, but when we think about why it resonates across the industry, there is something for everyone when it comes down to looking at financial advisors simply coming from different channels.

Christine Baker: We heard already from Ron and his variety and his background, his experience, and the things that he was able to experience really in his career, where he was with a firm that had a client-first mentality. Then regulation and price compression comes and the needs of his practice shifted. He looked for something in a different channel, and then he found what he's looking for here at Independent Branch Services at Schwab.

Christine Baker: I think it's because, based on the channel ... And we've talked about this before, in fact, you've referenced it often, Matt. You and I talked exactly about this topic, and that is for some financial advisors, it's about, "I want to stop being all things to all people." You heard that earlier in Craig's comment, and certainly that's the case. You're going to see in a minute when we talk about what is it about the model that's attractive.

Christine Baker: These folks want to get out of the minutiae. They want to focus on clients, deepening relationships, serving clients, and serving the community. Then there are those maybe in a wirehouse environment or in an employee type of environment where they're working hard, they see every day that the value is coming from the relationship they're building with the client and the trust that that client is placing in them, yet they look around and they start over every month again with no equity, no opportunity to really build a legacy for themselves and their family potentially.

Christine Baker: Then you've got other individuals who are very successful in their practice if you look at it assets, but it's a lot harder to take, let's say, a $200 million practice and turn it into $400 million on your own. You may have local brands, you may have decent infrastructure, and excellent stuff. That all comes at a cost. They're looking at basically the economics of what it's going to take to take their business to the next level.

Christine Baker: I think as we talk more about the model in the remainder of our time that we answer questions, I think it's going to show up through the way that we offer each of these types of advisors a unique opportunity to have their needs met.

Matt Ackermann: Absolutely. You mentioned Craig began this conversation talking about it. His quote was, "We are looking for talent." If you don't mind, I'm curious, when you say you're looking for talent, what does that great advisor look like? What's the talent you guys are hunting for here?

Christine Baker: I love that question. It gets me really fired up because every financial advisor, in my experience in the past, has always had a passion for growing their business, and a lot of financial advisors right now are beaten down. I say that it hasn't come at the hand of their firms necessarily, but just look what the industry's been going through.

Christine Baker: When I think of the most talented advisors, certainly client-first philosophy. We'll talk about that in the slide that you see in a minute. But the ideal advisor is looking for an opportunity to do things differently, and we talked about the channels. It's more really, drilling it down more, is that the ideal talent is someone that puts their client first.

Christine Baker: They're a financial advisor that is truly an entrepreneur. Their passion is serving clients, managing and growing their business. They don't want to do everything. If they're going to be the right fit for us, they put the client first, they've been doing it, it's all been on their back over the years.

Christine Baker: Now they're like, "I really just want to focus on clients, serving the community, getting the word out, deepening relationships. I've tried potentially to build that infrastructure for myself. It hasn't been successful for me. I'd love to partner with a firm like Schwab, with a brand and a reputation like Schwab, and be able to leverage everything that Schwab has to offer to serve my clients. I can focus on what I'm all about, which is doing the right thing, again, serving clients and community and growing a business." Christine Baker: But I love that the slide is up here. We can speak to really these things. I mean I've mentioned client-first philosophy a number of times, Matt. I think one of the greatest things now for seven years since the inception of the program and coming from the independent space for a number of years prior, one of the most favorite things for me is when I get on the phone with a financial advisor, and my team would just affirm this as well, and we talk about Schwab's philosophy of client-first and transparency. Certainly, there's the low-cost component.

Christine Baker: There's not been, in my experience in seven years representing this model, a financial advisor that that hasn't resonated with. There's not been a financial advisor that said, "Well, tell me more about that. I never knew that Schwab was like that." That's not the case. Why is that? It's because for over 40 years, when Chuck laid it down, everybody picked it up and started carrying that. They've carried it and now I do for the last seven, and this business continues this clientfirst philosophy.

Christine Baker: We do it around the business table at Independent Branch Services. Schwab does it around all its leadership tables. We're carrying it forward, and it comes right down to the independent branch leader that comes to us and places their trust in us to deliver to their clients, which deepens their relationship, increases chances for referrals..

Christine Baker: It's fantastic. I can speak to it in second person because I live it every day and I, most importantly, hear it from financial advisors every day. "Oh, yeah. I know that about Schwab." Christine Baker: The other thing, we've been talking about scale since the beginning of the call. For those of us who've been in the industry a long time, this idea of scale is used all the time, all different places, and it means something different everywhere. The big question I would ask everybody to ask themselves is: is your firm built for scale?

Christine Baker: The reason why we can stand firm on this second principle is that, again, over 40 years ago, this firm was built, there were no financial advisors. It was a firm built with passionate employees to serve clients, because everyone deserved to have quality financial advice at low cost. Our chassis is a straight-through processing chassis to the client, always has been since inception.

Christine Baker: What Independent Branch Services has done is layered on top of it an independent franchise model that appeals to entrepreneurs who say, "Yeah, client-first. I don't want to do everything. Let me partner with somebody who can really deliver it." This is why we're unique. All the firms that want to deliver scale, the question is: can they? Are their margins and their infrastructure and their technology allowing them to do it? We can. That's the big difference why. In a minute, you'll see the results.

Christine Baker: Transparent revenue share. You heard Ron. I don't have to say much more about this. It's simple. It's straightforward. In our design, we intended to create a revenue share, not a compensation program necessarily and certainly not based on what you sold, what the internal gross dealer concession was, and then you're going to get a piece of that.

Christine Baker: If it's an asset in your practice and it's earning revenue, you're going to share in that revenue with us. You can see from this the different types of revenue that we do share on. Much of this is unprecedented in the industry. I say that with a great deal of confidence.

Christine Baker: Business support, we don't even have enough time to talk about the business support that we have, quite frankly. Subject matter experts that are dedicated to serving our independent branch leaders. They're not in competition. When I say subject matter experts, they go from operations to technology to marketing to fixed income to advice to wealth strategies to equity compensation planning, financial planning. It's vast.

Christine Baker: As I said earlier, the ideal financial advisor doesn't want to do all that. They really want to focus on the client and they want to leverage all that. That's only the tip of the business support that we offer.

Christine Baker: When financial advisors hear that, I think we talked a little bit in the past, Matt, about where are the trepidations. They don't believe it. They just don't. I have a fantastic team; we all do, across this business that's there, whether it's in financial advisors that are looking at the model or the independent branch leaders that are on board. How do you leverage this? Because even the independent branch leaders that are on board are like, "Man, I can't get my hands around all this." Christine Baker: We've got market leaders and business development coaches, marketing coaches that will be there for the independent branch leader afterward, once they take the lead, but they're like, "Okay. There it is. How do I leverage it?" The most successful independent branch leaders have leveraged all of this that you see here to the max.

Christine Baker: I think if we can just look, the results speak for themselves. When we talk about what happens and when you talk about scale, there are lots of ways to measure it, but here's one that everybody can get their hands around. In 2017, our average net new asset across our independent branches was $39.5 million in assets.

Matt Ackermann: Wow! Christine Baker: Yeah. For those of us, and probably everyone on this call, whether I was representing Schwab today or not, I can't say that I've seen those numbers in the industry. Now, obviously, this isn't going to be everyone's franchise, and your performance as an independent branch leader is going to differ from mine, et cetera. But this is what we have to look at is, realistically, it's a fact. We report this in in our franchise disclosure documents.

Christine Baker: Another thing people think, especially if you come from the independent space, "I barely can manage my practice today. How am I going to manage a practice that's bringing in that much asset?" Another demonstration of the scale here, on average, our 50 independent branch leaders have one to maybe three, but mostly one to two, financial consultants and a client service manager. They're managing this type of net new asset on an annual basis.

Christine Baker: I think that speaks to the ability of the scale as well. Yeah.

Matt Ackermann: Absolutely. You mentioned trepidations. I'm going to put on my skeptical advisor hat for all the advisors listening. What is it that gives advisors pause before they make this leap and join the model? You have to have that moment, there's always ... When I'm about to do a new and exciting project, the day before, the advisor will call me with their concerns and their worries. What are those eleventh hour worries that keep even the best advisors that eventually join your platform ... What gives them pause and slows them down from taking that leap of faith?

Christine Baker: It gives them pause. If they make that shift in their perception, the pause turns into a call to action. That's one thing, I think, and you're looking at it on the screen, it's hard to fathom, especially when you have pain points, like what we talked a little bit about, we're going to talk more about.

Christine Baker: It's hard to fathom that someone who's been working diligently and building their practice doing the best they can in the face of price compression, transforming themselves in any way they can to grow their practice, serve clients, and be profitable, to look at these numbers and say, "That doesn't make any sense." If you look at the franchise doc, it's a minimum of $10 million net new to even keep the franchise. You're like, "I've never done $10 million in my career on an annual basis." They look at these numbers.

Christine Baker: I think they have to get over that and really dig in deep. It's a long sales process. We go deep on everything about the model. Then they learn, they talk to other independent branch leaders. They hear about the power of the brand, the power of the marketing, and the magic comes with that entrepreneurial spirit pairing it. But they don't get that right out of the gate, especially when they first hear about the model. They're like, "I don't get this." We continue to work through it.

Christine Baker: Some, they don't walk away necessarily because they can't believe it. A lot of times ... In some cases I should say ... they choose not to come our route because they've gotten comfortable doing what they've been doing to manage all the pain points.

Christine Baker: You know this, Matt. Some financial advisors have to identify a way to survive so they go to minimum client accounts, they go to niche markets. They do anything they can to build a manageable practice, maybe invest in technology, maybe add more staff. They've already built that, and that's what they're hanging onto. It does take transformation. That's trepidation.

Matt Ackermann: I think you're right. I think for a lot of advisors, that is "the enemy of success". It's the enemy of really getting the scale on these opportunities that this industry is full off. There are so many great opportunities. You heard Ron talk about succession, and succession is something that's so top of mind for so many advisors right now. We hear this all the time, about worries about succession and legacy. Is that something you're hearing a lot from advisors now? Succession planning is something that's ultimately drawing folks to this great model.

Christine Baker: Yeah. We are, actually, and certainly finding the right financial advisor for our practice takes time. It's tough. You've got to build a relationship. It's not like you hang a shingle and this successor comes up. As we think ... And we have seriously thought about succession and what value does our model bring to it, certainly the people that we are, as we serve our independent branch leaders and helping them identity their value prop and finding the right, if we can, successor in their market.

Christine Baker: But I think we think of it differently because the biggest value that we can bring, and one of the biggest challenges financial advisors face in this succession of their practice, is the retention, the client retention. In our model, if you think about it, the platform, the brand, the cost, the offering in a succession all stays the same.

Christine Baker: We can't put a metric around this, but if you think about it, when the financial advisor moves from point A to point B in their career, the client's experience remains the same. The likelihood that retention is going to be higher is a high likelihood in and of itself. Our independent branch leaders, when they think about their succession, they're looking at financial advisors that may be joining their practice as part of the succession plan, but also feeling quite confident that in doing so that their clients will be well taken care of when they pass the baton to either a family member, as in Ron's case, or another financial advisor that they developed a relationship with.

Christine Baker: We're there to help them navigate those waters, but we do believe, as some of our independent branch leaders do as well, that by having the Schwab brand through that transition of their practice, it aids in the retention and obviously enhances potential value. It potentially enhances that value for the succession in that case.

Matt Ackermann: You mentioned Austin earlier. I had the great opportunity in Austin to meet so many good advisors, and it's advisors from both ends of the spectrum here. It's advisors like Ron that are veterans in this industry and have built up incredible careers over the past three-plus decades. It's advisors that are rising stars in this industry, too. Do you have some other great examples of advisors that have taken this leap of faith and have joined the network and really are helping to grow this great franchise nationally?

Christine Baker: Yeah, we do. We talked about the different channels that folks come from. I'll mention it again: independents, regionals, wirehouses, banks, trust divisions, retails. But the thing that's really interesting to me when I think about this question is there are smaller practices and then larger practices. You'd think that maybe a particular model has a particular size of asset, and it doesn't, because, the reason that we talked about those pillars that were up there before, a small practice needs infrastructure needs subject matter expertise just as large practices do, but, obviously, they have different moving pieces.

Christine Baker: We've had financial advisors in group practices with independents, so two, three, four staff in various roles in the practice upwards of $300 million and $400 million practices move to Schwab in an effort to ... They see it as the only way to take their business to the next level, because that's a big leap to double their practice when you're at $100 million-plus or $300 million-plus. You need a lot of support.

Christine Baker: Smaller practices are benefiting as well. Some folks, as I mentioned, coming out of a wirehouse or a captive environment, being able to really build an independent practice, as they migrate from an employee model, use the same type of infrastructure that's necessary. I think that the real message here is, depending on where they're coming from, they find value in any of the fundamental drivers to the success of our model, and they do it regardless of their size or where they come from.

Matt Ackermann: Great. Great. Now before we head into some of the Q&A with our audience, for an advisor that wants more information about this great platform, where can they turn?

Christine Baker: I think we've got a screen up where they can see there's an 800-number listed there. We'd love to talk to you. We will address a lot of questions. But a lot of times, they're hearing about this model, which is really a very personal conversation. Feel free, and we will do our best to reach out to all of you here and follow up to address any questions before we go to Q&A. But as you see up on the screen, we've got the website as well as the phone number.

Matt Ackermann: That was fantastic. We'll leave up there if folks want to jot it down for themselves, for a colleague, a friend. We've gotten some great questions from our audience here, so I'd love to get us rolling.

Matt Ackermann: Ron, the first question here is for you. Ron, were you nervous about joining a new platform like Schwab IBS with so many other options out there? What do you think, Ron? What would you say to an advisor who might be wary about joining a platform like this?

Ron Endsley: Well, of course, I was nervous about making change. I think that's always the cause for caution and concern. But, as I mentioned earlier, I really did do my due diligence and had really looked all over the industry for what I thought would be a good fit. Charles Schwab, the name, the branding, everything that you put the package together, I just couldn't find anything that would fit Matt and I any better.

Ron Endsley: With price compression going on in the business, Schwab seems to have a handle on that, the turnkey package, the marketing. Everybody here has such a wonderful attitude. Everybody wants an independent branch to really succeed and grow their business, and they're ready at all times to help us do that. Any fears I had have been laid to rest. I definitely know that I made the right decision.

Matt Ackermann: Fantastic, Ron. Christine, I have a question here for you. I think it stems on something Craig may have started with earlier in saying that you guys are very strategic about your growth. This member of our audience was asking: how does Schwab create/determine its territories? To the point earlier, this isn't a grab where you're grabbing every advisor possible. You guys are very selective. How does Schwab create/determine its territories here?

Christine Baker: Yeah. It's really interesting. It's part of the magic of the model, because we want to find that talent that has strong community ties and then combine it with our brand. What we do is when talent rises and has an interest in the model, we go in and we look at the current market share, the affluent opportunity in that area, and then we identify if it's going to give the sufficient growth opportunity over the long haul. I mean this is a scale played for 15 years and maybe more, depending on the individual situation.

Christine Baker: We want a great opportunity as demonstrated through low market share, [inaudible 00:46:04] low market share, and affluent asset opportunity. Then we look for those zips that can be assigned to that independent branch and, from that, really just means that that's the market that the blind one too many marketing is limited to, but it also is that same market where flow that may come in from Schwab.com or any other type of channels that an investor may use by zip code would then come into that new franchise as well.

Christine Baker: It's a combination of market share, affluent opportunity providing the franchisee with sufficient growth over the long haul both through their outbound marketing and business development efforts, as well as incoming interest from investors and accounts and assets from investors in those zips.

Matt Ackermann: Fantastic. Now this next question, Christine, comes in from the audience as well. Is there a multiple advisor team approach model here that they should think about? We've met Ron. He has his son here, it's Matt. But is there a multipleadvisor team approach model as well?

Christine Baker: Yeah. It's a great question. We see it in the business. You've got ensemble groups with independents and sole practitioners with others. In our world, from a franchise perspective, only one individual can own the franchise. If it is a multiple ... And we do have plenty of them. If it's a multiple-advisor approach, one individual is the franchise owner, independent branch leader, and that individual would hire, just as an independent model, any other financial consultants that would join their practice. In Ron's case, his son, Matt, is his employee. We have other multiple-advisor approaches as well.

Christine Baker: What we don't have, just to be clear, is the franchise ownership on a partnership level. Today many independent ensemble groups form an LLC. They're all partners in that LLC and share the equity of the practice. In our world, it's a sole proprietor ownership in the franchise with no "equity share" in that franchise.

Matt Ackermann: Excellent. This question comes from an advisor asking: what advantage would there be to go from, say, the Schwab independent RA to the Schwab franchise model?

Christine Baker: As Craig said, unique. They're both unique. The only time we see individuals that might not be a registered investor or choose to be a registered investment advisor solely is when they're having either two things. One, they no longer want to manage the portfolios and even beyond that. They're tired of having to have that infrastructure responsibility, brand responsibility, et cetera. I find that in the financial advisors that are either investment advisors or RIAs only. It really depends on who they are and what their passion is. Aside from that, as Craig pointed out, they're two very different models.

Christine Baker: The advantage would be to someone who is no longer interested and lost maybe a passion or lost the efficiencies of managing the portfolios, hasn't been able to gain that momentum to get the growth that they're looking for, or they want to not have their own brand and share in the Schwab brand, because that's fundamentally the difference between the two models aside from the portfolio management role. But it's based on very individual needs. There's no line in the sand.

Matt Ackermann: Ron, the next question's here for you, and I'm combining two questions. For how long have you been a franchisee? When you think back on your career, do you wish that you had a chance to do this earlier?

Ron Endsley: Matt, I've been a franchisee for four months, and it's just been a wonderful four months, even though it comes with a transition, which is a terrible amount of work in explaining why and so on. But it's been really easy to explain, of course.

Ron Endsley: To wish I've done it earlier, you know I do. I think my timing's pretty good, but a few years earlier, maybe when the franchise opportunity first started as well, yeah, that would probably have been a better time. But since I missed that, and, of course, the industry's changed quite a bit in that period of time, too, and price compression really became an issue from six years ago to today.

Ron Endsley: Yeah, I wish I had started earlier, but I have no regrets about being here right now. I think my timing's about right. I think this model is the model of the future and just so thankful to be a participant in it.

Matt Ackermann: Excellent. Now have time for a few more questions. Please send your questions in. If we don't get a chance to answer them live here on the air, we will always make time afterwards for us to reach out to you guys and get these questions answered.

Matt Ackermann: Christine, the next question's come in for you. It's something that people are very wary of right now, and that's compliance. Talk to us a little bit about compliance responsibilities and how Schwab IBS helps advisors in terms of compliance.

Christine Baker: If you're coming from an independent environment where you're responsible for actually setting up your compliance policies and managing to them, in our model, that would be a vast difference because you would fall into the compliance efficiencies, policies, and procedures of Charles Schwab's BD and RIA, so it's turnkey. We have a supervisory structure that's not too dissimilar than one that you would see in an independent broker-dealer model, where's it's an OSJ structure where supervision is delegated through that hierarchy. You would be responsible for any of your staff and we would supervise you as the independent branch leader and your activity.

Christine Baker: Now just as in all things, technology is a big part of everything that we do and scale. You would be able to leverage all of that. It's fairly streamlined; you've got a lot of support from our market leadership group and our internal supervision group there to help you stay in compliance and execute business with efficiencies and within guidelines. If you're with an RIA or part of an independent RIA now, there's probably some inefficiencies that you could realize simply because you're leveraging a much bigger platform here at Schwab.

Matt Ackermann: Excellent. Christine, another one here for you. When an advisor moves their clients and assets to the franchise model, do they give up ownership of those clients?

Christine Baker: There's an option. In general, I'd like to say this, we all do, our model is usually seen, and Ron can probably attest to this, as the last-stop model. Most of the financial advisors, I could say nearly all, have opted to transition their clients and allow them. Then in doing so, they become Schwab clients because their beliefs and their commitment is that this is their last stop and that it's the best place for their clients. They plan to retire from the role as independent branch leader or sell the franchise, et cetera. Most everyone does that.

Christine Baker: If they choose not to, and that's fine, they can, there's a little bit of a different revenue share for that because you are going to take the clients in the event you would ever leave. Therefore, the premium revenue share that we offer our independent branch leaders early on in their career with us is waived if you decide to keep ownership.

Christine Baker: We recognize the entrepreneur that may want to. We haven't had anyone take that on all of their asset base that they've transferred yet. They all have, for the most part, turned over the vast majority of their clients to Schwab.

Matt Ackermann: Excellent. We started this conversation talking about scale and entrepreneurship. Ron, I think this is a great question to wrap it up with. How much has your business grown over the past four months? Do you see that great trajectory for growth that we've been talking about for the last hour continuing as now that you're a Schwab franchisee?

Ron Endsley: Thanks, Matt. Our business is growing at a rate that it hasn't for a number of years. I won't be specific, but let me just say I'm very tickled with what's going on. It's amazing, really, the Schwab name and what we bring to the table and the brand awareness, a good reputation. We're going to be very, very happy here for a long time.

Matt Ackermann: There's no better way to end the webcast than those kinds of words from Ron. This has been just an hour that swung by for me. I really want to thank everybody for an incredibly informative webcast today. I mean thank you, first and foremost, to you, the InvestmentNews audience, our amazing sponsor, Schwab IBS, and, of course, to our great panelists, Ron, Christine, and Craig.

Matt Ackermann: If you found today's conversation informative and interesting, and you'd like to share with a colleague, feel free to send them to InvestmentNews.com/webcast to listen to an archived version of today's conversation. That archive will be available shortly over the next couple of days. This has really been a great conversation. For me, I hope everyone is just as tickled as Ron is because it's been awesome. For InvestmentNews, I'm Matt Ackermann.