Networking opportunities, industry insights make advisory board membership worthwhile. In a continuation of its efforts to improve service to its registered investment advisor (RIA) client base, Schwab Institutional recently named its 20-member advisory board for 2005 and 2006. In return for giving Schwab confidential feedback to on industry-wide and practice-specific issues, advisory board members say they get insights into the wealth business that go beyond anything they would encounter in their day-to-day work.

“It’s a tremendously positive experience,” says Roger Reynolds of Coldstream Capital Management in Bellevue, Wash. He’s in the second year of a two-year stint on Schwab Institutional’s advisory board. “It gives you a broad perspective on the industry from a mission-critical vendor and the opportunity to learn from firms similar and dissimilar to yours from across the country.”

Schwab Institutional also sets store in its advisory board, though more as a sounding board for its RIA initiatives than as a networking venue. “We place great value on the insight and feedback our advisory board members provide on our business, the industry and their needs as independent investment advisors,” Schwab Institutional president Deborah Doyle McWhinney says in a press release. “The independent investment advisor industry is thriving, and the counsel we receive from our advisory board ensures that we continue to provide our clients with the platform, products and programs they require now and in the future.”

Why so interested

San Francisco-based Schwab Institutional provides custodial, operational and trading support to about 5,000 RIAs. With assets of over $350 billion, it accounts for about a third of Charles Schwab & Co.’s overall custodial business. And it seems to be growing. In 2004 Schwab Institutional took in about half of Schwab’s $50.3 billion in net new money.

That kind of growth makes sense to Chip Roame, managing principal of Tiburon Strategic Advisors in Tiburon, Calif. He says the independent advisor channel – RIAs and indie brokers taken together – is the fastest growing distribution outlet in the financial service arena. In the nine years between 1994 and 2004 independent advisors saw private assets under management grow at an annualized rate of 16%, says Tiburon. In second place, discount brokers realized asset gains of 13%. Full-service brokers added around 10%.

A lead like that goes far to explain custodians’ interest in RIAs. Like other vendors to the wealth space, custodians view RIAs as a gateway to a market that’s likely to continue expanding through the next several decades as well-off baby boomers hunt for independent advisors to help them retire comfortably or, where that’s not in question, transfer their assets to the next generation as efficiently as possible. Tiburon sees that pushing independently advised private assets from $17 trillion or so now to around $30 trillion by 2010.

Custodians have responded by beefing up their services to RIAs, particularly around client referrals. TD Waterhouse recently overhauled its AdvisorDirect program “to provide more qualified and targeted leads for advisors,” according to Thomas Nally, a senior v.p. with the firm’s institutional service group. As a part of that effort, TD Waterhouse has doubled end-client investment minimums for RIA referrals to $200,000. Schwab Institutional says its three-year-old referral program, Schwab Advisor Network, has made more than 50,000 referrals to RIAs, with 20,000 of them paying off to the tune of $14.6 billion in new assets.

Unvarnished

But it’s hard to peg Schwab Institutional’s advisor panel strictly as a response the boomer wealth explosion. For one thing, says Michelle Swenson, a senior v.p. with Schwab Institutional, it’s been around for ten or 12 years. It also functions less as a make-nice venue than as a device for gathering grass-roots intelligence. “We ask participants to speak for the industry,” she says. “We use our advisory board to get feedback on important issues with real implications for us and for our clients.”

Coldstream’s Reynolds goes further to underline that Schwab Institutional’s advisory board meetings – which occur twice a year in two day-and-a-half long sessions with additional informal consultations as the need arises – aren’t just tea parties. “They put ideas for strategic initiatives in front of us, which has led to some very heated debate,” he says. “That’s to the point of having someone stand up and tell them, ‘Look, if you do that, you’re going to lose my business.’ They don’t populate this board with a bunch of Schwabies who are there to drink the Kool-Aid.”

In fact, says Swenson, board members are selected to represent different geographic regions, practice sizes and client bases. That diversity makes it easier for board members to swap ideas without fear of showing their hands to competitors, says Reynolds. “I don’t compete them,” he says. “That allows you to build a rapport [with other members] in a neutral setting.”

Advisory board memberScott Roulston, a principal of Fairport Asset Management in Cleveland, Ohio, agrees that Schwab Institutional wants to hear what advisors have in mind. “Their culture encourages feedback – and sometimes feedback can hurt,” he says. “But Schwab is very good at introducing ideas and then shutting up and listening.”

They’re also pretty good at putting ideas into action, says Reynolds. “Schwab [consults us on] short-range projects and long-range projects, and we can see them moving on some of those,” he says.

Best and brightest

Jill Hollander of Financial Connections in Berkeley, Calif., says that gaining an insight into a custodian’s culture – in her case TD Waterhouse – is one of the benefits of advisory board membership. “A good custodian is invisible,” she says. “That means things are going right. But being on TD’s board has given me a better sense of the company across all levels, and an understanding that its commitment to customer service – which is really the differentiating factor – goes all the way up.”

Beyond that, says Hollander, “being a sounding board on issues and trends” for her firm’s custodian gives her “an opportunity to step back and look at the industry years forward.” Fairport’s Roulston agrees. “I get to learn about Schwab’s leading-edge thinking,” he says. “I get information on trends in the industry that I wouldn’t otherwise get.

Roulston also values the opportunity to learn from other firms. “I hear how some of the best and brightest people in the industry are tackling the same big issues that I face,” he says. “Being on Schwab’s advisory board gives me a chance to have great interaction with people from great firms.”

Besides Reynolds and Roulston, Schwab Institutional’s advisory board members for 2005 and 2006 are Libbie Agran of Libbie Agran Financial Services in Santa Monica, Calif., Andrew Berg of Homrich & Berg in Atlanta, Jeffrey Buckner of Plancorp in Chesterfield, Mo., Susan Colpitts of Signature Financial Management in Norfolk, Va., Mark Griege of Robertson, Griege & Thoele in Dallas, David Henion of Forte Capital in Pittsford, N.Y., John Huber of Geneva Investment Management in Chicago, Joel Isaacson of Joel Isaacson & Co. in New York, Wendy Laidlaw of R.M. Davis in Portland, Maine, Douglas Lane of Douglas C. Lane & Associates in New York, Ann McCorkindale of Honkamp Krueger Financial Services in Dubuque, Iowa, Lon Morton of Morton Capital Management in Calabasas, Calif., Andrew Putterman of Lydian Wealth Management in Rockville, Md., Drew Simon of Baydush Simon Weaver in Boulder, Colo., Susan Spraker of Spraker, Fitzgerald, Tamayo & Mosiand in Maitland, Fla., Marita Sullivan of JMG Financial Group in Oak Brook, Ill., Jon Vannice of Boys, Arnold & Company in Asheville, N.C., and Michael Yoshikami of YCMNET Advisors in Walnut Creek, Calif.

Along with Hollander TD Waterhouse’s advisor panel members are Karen Altfest of Altfest & Co. in New York, Ron Brock of Sheaff Brock in Indianapolis, David Dowell of Russell Capital Management in Lexington, Ky., Edd Hyde of Radnor Financial Advisors in Wayne, Pa., Michael Joyce of Michael Joyce & Associates in Richmond, Va., Ravi Kothare of Sterling Capital Planners in New York, Rick Kramer of Wealth Advisor Group in Hendersonville, N.C., Ray Mignone of Ray Mignone & Co. in Little Neck, N.Y., Mark Mirsberger of Dana Investment Advisors in Brookfield, Wisc., Randy Oldenburg of Camden Financial in Scottsdale, Calif., Randy Ordines of Courier Capital in Jamestown, N.Y., John Ritter of Ritter Daniher Financial Advisory in Cincinnati, Ohio, Ron Roge of RW Roge & Co. in Bohemia, N.Y., Terry Siman of Executive Financial Services in Spring House, Pa., Virginia Stanley of REDW Stanley Financial Advisors in Albuquerque, N.M., Ben Tobias of Tobias Financial in Plantation, Fla., Jeannie Wyatt of South Texas Money Management in San Antonio, Texas, and Charlie Zieky of GLT Wealth Advisors in Encinitas, Calif. –FWR