Ep 89 - How Schwab's Moves Could Impact Your Business (Advisor Growth Series)




Schwab's potential acquisition of TD Ameritrade could have an impact on your business and your clients. Jay Hummel and I discuss the implications of this major industry transaction on this installment of The Advisor Growth Series.


I have designed a leadership and goal-setting system for financial advisors that provided clarity to you and your team while producing results. Pick-up a complimentary copy of The OKR Leadership System here: www.jaycoulter.com/leadership




Podcast Transcript

[00:00:01] Welcome to the Resilient Advisor podcast. This episode is part of the Advisor Growth series. My name is Jay Coulter and my partner in this series is Jay Hummel of the Wealth Advisor Growth Network. Jay, for folks watching this on video, where are you?

[00:00:19] Pretty cold and am in the boardroom at the New York Stock Exchange. Are you and my buddy Clint Sorensen and well, shield and we do a lot of work with Crane shares and so they open the market this morning. They rang the bell. And so I'm here hanging out with those guys.

[00:00:34] The architecture for podcast listeners, you can't see this. The architecture in that boardroom looks just amazing.

[00:00:41] So it's it's pretty cool. Obviously, growing up as a student of finance, it's a once in a lifetime opportunity to sit here. So I'm glad we get to take it from here.

[00:00:50] That's perfect. So tell me about the crane shares offering that launch today.

[00:00:55] Crane shares is John Crane founded the company. A very interesting story, went to China years ago, ended up launching a media company.

[00:01:03] He opened China to you, to the Rolling Stones.

[00:01:09] He opened the Chinese market and media space. And he ended up selling their company. And he came back to the US and ultimately understood how to invest in China. So he launched an ETF company that focuses on investing in China. So they're one of the leading providers of ETF in the Chinese market.

[00:01:25] And so today they launched a new ETF. What index is it based on?

[00:01:30] They're doing it. It's based on the Chinese index. It's basically a manufacturer know broad-based Chinese index. They actually didn't launch a new one today. They just happened to be open in the market today because they wanted to tell the story about the company.

[00:01:45] Got it. Got it. I'll put links to Crane shares in the podcast notes. Jay, let's talk about the big news this week, and that is Schwab's potential acquisition of T.D. Ameritrade. It's going to have implications. All the talking heads have been out the last 24 hours giving their opinion. What do you say?

[00:02:03] Oh, I mean, I think it's really interesting. I think it's smart. I mean, it's going to. It's going to actually add to their banking capabilities. And as you and I have talked to, his advisors need to add more services. I think it will add to the banking capabilities at Schwab. Obviously, it's going to take out a choice. So, you know, in some ways, it now.

[00:02:20] Now our guys have one less potential partner on the custodian side. But, you know, I've always been a Schwab fan, was a Schwab client, Grandma and Schwab.

[00:02:30] So I think in the end, I think for the R.A. market, it's going to be a good thing because it's going to add to the banking capabilities of slop.

[00:02:37] Yeah, I agree. So I'm a client of Schwab. My RIA is custodian is T.D., both great platforms. I don't see how this hurts the advisors in any way.

[00:02:48] And along with Schwab reducing their eliminating trading costs, it just adds to a better client value proposition. I think the real challenge is going to come for the asset managers because now Schwab has even more power, which again will benefit the end client. But the pressure that will put on fees for all of these products really, really gonna make for compelling value propositions.

[00:03:08] Yeah, I wouldn't want to be an asset manager. We've talked about in today's market, it's really tough unless you're one of the major players that, you know, margin compression, fee compression is going to continue. And I think this acquisition is only going to spur more, more discussion around that topic.

[00:03:23] Yeah. I haven't run across too many firms that are using some of the other costs. The other smaller custodians, that would be potential acquisition targets. Now, really, it's going to leave. Schwab, Fidelity and Pershing, do you see any other players in the space that are acquisition targets for the picking right now or are they just going to die?

[00:03:42] I think they're going to die. I mean, I just don't see any other major player that anybody is going to buy. And so you're down the you're down you're down to the big three.

[00:03:52] And the real loser, E-Trade. I mean, their core value proposition of helping retail investors buy and sell stocks for a commission is gone.

[00:04:00] I mean, it's gone. Yeah. I mean, it's what it's why we've talked about before. I just I would never run a business where my sole proposition is we're cheaper. I just think at the end of the day, somebody is always going to be bigger. Someone's always going to be cheaper.

[00:04:15] And I think that's a value proposition. That's a that's a mess. And, you know, on the advisory side, you and I see firms that do that. It's just this is just another example. If you're if your number one proposition is we're cheaper, you eventually lose.

[00:04:30] Yeah, that's right. And really, the big take away is the closer you are to the client, the better and yet truer now than in this business. And gosh, the first half of the next decade you've got to get there quickly. Got to get there quickly. So Schwab impact was two weeks ago. We didn't get a chance to debrief that yet. Me What was your experience like an impact this year?

[00:04:53] Oh, I think it's it's an amazing event. But I think one of the things that we've talked about on this podcast that you. That rings true as you walk. Into that place, it's overwhelming. I mean, the vendor hall is just unbelievable. And it's great from the sense that there are all these vendors now that can provide a myriad of services to the RIAA. But at the same time, if I'm an adviser walking in there, I'm absolutely overwhelmed in trying to figure out who you do business with. It is an absolute distraction. And so I think this whole concept of always outsourcing, more accessing vendor management capabilities is key. And I mean, that vendor hall is just absolutely overwhelming.

[00:05:36] I can imagine. I tell you, I find advisers reaching out to me on a regular basis to ask about the next shiny new object, especially in the fintech space. And that's just them sitting in their offices. I can't imagine that exhibit hall and the overwhelming feeling that they had. Tell me about the asset managers that were there and where do you see that business headed as it relates to their relation?

[00:05:58] I know. You know, I worry about it. And we started the podcast here. I just think there's a lot of asset managers and you walk through that all. You know, I've been at an asset manager. You know, they do great work. But you know that that business is just becoming such a commodity. And what I'm concerned about is that you fast forward 10 years from now and half those boots won't be there. And you think about where we are. And distribution in today's world is standing at a booth, you know, handing out stress balls and it is at the distribution marketplace of the future. And I just you know, I'm concerned for that vendor hall. I just think it's tough space to be in and unfortunate. I think half of those people that we saw this year in impact will be around 10 years now.

[00:06:42] Yeah, I completely agree. I've shared this on another podcast about a month and a half ago I went to Michael Kitson is X Y Planning Network conference last summer. Yesterday there were zero asset managers in the exhibit hall. So I think the future's pretty clear there and I hate it when I work for an asset manager for a long time.

[00:07:03] Create a lot of value, but it's just it's a tough market. And the people who own the shells. Schwab, as we talked about, is going to do the right thing by the end client, which is great, but that means prices are coming down. It's going to be a hard business to be in.

[00:07:18] And you and I had talked about previously the proliferation of CRM vendors at these events, both the old stalwarts and the new startups.

[00:07:27] CRM decisions are very, very challenging for advisors. You have any takeaways from impact as it relates to CRM vendors in particular?

[00:07:36] Well, and you know, my opinion, I'm a little contrarian on this. I feel like there's too much focus on CRM.

[00:07:42] And as we've talked, it is every business sits there and they say, well, their CRM is as good as there is. Their processes are ha. And there are so many firms that I saw it. You see all these advisors sitting in these CRM demos, getting themselves all worked up about process workflow. And you go ask them how many clients and they have 120 clients and they spend 60 percent of their employee time and the advisor time trying to get their CRM right. And you can run it on an Excel spreadsheet. Thankfully, if you really needed to. So I just think, you know, CRM continues to dominate and dominated the vendor hall impact that dominated the sessions. I just think it's in many firms it's a meaningless distraction to spend as much time as firms are spending on it.

[00:08:29] So you and I have a difference of opinion as it relates to CRM as it with inside of an advisory practice. But what I have found to your point about most of these businesses can be run in an Excel spreadsheet. The advisors that would build that Excel spreadsheet still wouldn't execute on it. They won't execute on a CRM. They won't execute in an Excel spreadsheet. I wish we could repackage CRM as operating systems because I think you get more buying from the firm. It makes it easier to delegate tasks. But where I think the biggest problem comes from what you just talked about, the shiny new CRM that supposed to make your life easier. Isn't really gonna do it if you will execute. Pick a really simple one, which typically is not salesforce. Stick with it for the long term. You've got data-rich tools at your disposal and it can really have had an impact.

[00:09:15] But don't customize it just because.....we've talked about it. Just because you can do something doesn't mean it's a good idea. And that, you know, you add all these fields and I'm going to customize it. And boy, my CRM is going to make me different and unique and all these things. And you take something like Salesforce, which is brilliant off the shelves and you've created complete problems three to five years from now when you have to unwind all the customization decisions that you made.

[00:09:42] So you and you and I go round and round on CRM, but I just think it's people are way distracted by it.

[00:09:49] And it just to me in some ways, it's very, very unnecessary.

[00:09:54] Awesome. Well, Jay, thanks for taking the time while you're sitting there inside of the New York Stock Exchange to come on. Really? We're getting great feedback on this series, so I appreciate your continued participation.

[00:10:04] Well, thanks for having me, Jay.

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