Schwab Exec Sets $3 Trillion Goal for Advisors
Charles Schwab Corp has set an ambitious goal of overseeing $3 trillion of client assets within two years, a company executive said this week.
In a call to employees of its Investor Services division, which deals with retail investors through call centers and more than 300 branches, division head Terri Kallsen said they must amp up their services and skills to win the loyalty of wealthy clients and prospects.
Schwab ended 2015 with $2.51 trillion of client assets – including $1.36 trillion in Kallsen’s retail division and $1.16 trillion in its Advisor Services division, which works with registered investment advisors and their clients.
“We are on a great path to do that as a firm,” she said in her Wednesday rallying call. “We are now the largest client asset firm in the country, and we surpassed Bank of America in 2015.”
BofA’s global wealth and investment management division had $2.46 trillion in client balances as of Dec. 31, 2015.
Schwab, which has a history of razzing more traditional firms such as BofA’s Merrill Lynch through ads accusing them of duping small investors, grew client assets by just 2% in 2015, well below its long-term growth rates. Kallsen also said that her division’s “client promoter score,” which measures service to clients and client satisfaction, is “not where we need to be.”
See-sawing between cheers for their hard work and tough talk about the need to do better, she said Schwab this January has been attracting many new clients who trust the brand but also said employees must work harder to attract new customers and retain existing ones.
Schwab’s total client assets grew by just 3% in her division last year despite a 7% growth in new households. It also brought in $1.15 of new assets for every $1.00 dollar that it lost through transfers to rival firms.
“You all work much harder than 15 cents,” she said of the transfer-of-accounts ratio that is a key metric within branches, “so we are setting that goal more aggressively.” She did not offer specifics.
Kallsen, who joined the discount brokerage pioneer in 2012, told analysts in July that Schwab will spend heavily on retail expansion. She wants to more than double its sales force of financial consultants to more than 3,000 from about 1,200 and grow its branch system by more than 50% to over 500 over the next decade.
Hitting $3 trillion of client assets by the end of 2017 would require 20% growth from today, which could be a difficult task given the start to this year’s market and last year’s 2% growth rate.
“In an up market, say one growing at 10%, they could have done it already,” said Richard Repetto, an analyst at Sandler O’Neill & Partners who has long followed Schwab. “It is difficult now, but it’s always a worthy goal.”
A Schwab spokesman agreed. “Reaching that goal is possible, but, yes, would always also be impacted by the market and whether that is flat, rising or declining,” he wrote in an email.