Charles Schwab’s top leaders apologized to the firm’s 15,000 advisors, especially the 7,000 TD Ameritrade advisors who may have experienced a rocky onboarding of their 3.6 million accounts since the spring of 2023.
The conversion “was imperfect, and we all recognize that, but we’ll continue to work hard to address issues you raised,” Walter Bettinger, CEO and co-chairman of the board, told more than 7,500 advisors at Schwab’s IMPACT conference in Philadelphia this morning.
Schwab reportedly misplaced a number of former TD Ameritrade advisors’ million-dollar-plus client accounts during the process of converting them to Schwab’s platform, assigning them to incorrect practitioners instead. As a result, advisors could not access client portfolios for 24 hours or more.
Advisors also criticized the firm for being slow to answer customer service calls and make corrections, like locating misassigned accounts, according to a scathing report in Barron’s.
Bettinger said he thanked all of Schwab’s advisors for telling the firm’s story, but offered “particular gratitude to all the former Ameritrade advisors. You have gone through a tremendous amount of change this year. The time and energy you’ve put in for the conversion was significant. I don’t want to discount that in any way,” he said.
Schwab President Rick Wurster, who shared a stage with both Bettinger and Bernie Clark, the company’s managing director and head of advisor services, thanked all the firm’s advisors for allowing Schwab executives to take the past two years since the acquisition to pick the best of what both predecessor firms offered, “to make sure it’s the best custodial offering we’ve ever had.”
“We’ll face hurdles,” Clark acknowledged. “Things will be imperfect at times, but if anybody in this room isn’t feeling listened to or heard about what’s going on, that’s a fatal flaw for us. We’re going to work on everything and are addressing issues you’re bringing up already,” Clark said.
“We know most [complaints] are experiential, but that’s important. That’s how you run your business. We certainly don’t want you spending time away from your clients. We will find our right place in all of this,” he added.
Despite challenges in 2023, the firm continues to offer advisors and clients security, safety and stability, Bettinger said.
The firm just wrapped up its 12th consecutive quarter with adjusted pretax margins of more than 40%. “I say adjusted because that’s just excluding the onetime cost of the configuration of the Ameritrade acquisition,” Clark said.
“Those margins give us great room and great comfort in terms of challenging times. And of course, many of our competitors would love to have those results,” Bettinger said.
On a risk-adjusted basis, Schwab “is at the top of virtually all institutions. Yes, it’s a challenging year. We don’t measure our performance in any given year with how our stock price does, but how we serve our clients,” Bettinger said.
Schwab stock was trading at $49.34 this morning, down from a high of $95.53 on January 4, 2022.
During the general session, an advisor asked the executives why the firm was directly competing with advisors via its retail channel.
Bettinger said all three of the top players in the custody world offer products and services directly to investors via a retail channel. “There is competition across the industry. Together we have 12% of the market. That’s 88% of the market we don’t have, whether custodial or retail. Let’s go after the 88% together.”
In the “rare circumstance” where an advisor finds him- or herself in direct competition for a client with Schwab retail, he urged them to email or call him.
“We will stand down. In a decade or longer that I’ve made this offer, I’ve gotten two calls. In both cases we stood down and the advisor ended up working with those clients. We want to be deferential to the relationships you trust us with,” Bettinger added.
Clark urged advisors whose “experience isn’t quite right” to call or email top Schwab executives, including him. “We may not have every answer, but give us the first chance before you spring out into another place. The world is wrought with a negative story. I want to tell you a positive story,” he said.
