Charles Schwab announced that it is increasing fees for advisors participating in its Schwab Advisor Network referral program, reports FA Mag.
The advisors will have to pay a 5% increase for client referrals from the firm’s retail branch offices.
“As we have shared with advisors in the Schwab Advisor Network (SAN) program, after 18 years with no changes to the advisor participation fees, there will be an increase of 5% over the current fee for each asset tier,” company spokesperson Aven Wright said in an email. “These changes are planned to go into effect later this year.”
RIAs who want to work in Schwab’s referral program should have at least $250 million in assets under management when starting with the service, be registered with the SEC, and have at least two advisors with 10 years’ experience as an investment advisor representative and who hold either Series 7 and Series 65 licenses or a CFA, CFP, CPA, CIC, CIMA or similar designation.
The Schwab Advisor Network program has four fee tiers, with an advisor currently paying 25 basis points on the first $2 million in a referred account, 20 bps on the next $3 million, 15 bps on the next $5 million, and then 10bps on everything above $10 million.
As a result of the new structure, the first $2 million in an account will be subject to a 26.25 bps fee; the next $3 million to a 21.0 bps fee; the next $5 million a 15.75 bps fee, and then everything over $10 million a 10.5 bps fee.
About 140 RIAs use the Schwab referral program. Those that use Schwab as a custodian get the referrals from Schwab’s network of retail branch offices. The fee to advisors is not a one-time transaction but rather charged in perpetuity.
Schwab says the referral program allows advisors to gain access to potential clients who have been screened by branch offices and who plan to invest at least $500,000 within six months of the referral.
“The service is generally appropriate for clients seeking discretionary management of their accounts that is more personalized than what might be available in, for example, a discretionary wrap fee program,” the company’s brochure states. “The service is also generally appropriate for clients looking for an advisor who can combine discretionary management with financial planning services.”
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