Charles Schwab CEO Rick Wurster has confirmed there are no regulatory obstacles preventing the brokerage from offering spot cryptocurrency products, attributing the delay to the development of a proprietary, fully integrated platform. During a recent analyst call, Wurster also highlighted the significant growth of Schwab's Registered Investment Advisor (RIA) custody division, which has now surpassed $5 trillion in assets.
Key Takeaways
- Schwab CEO Rick Wurster stated there is “nothing from a regulatory standpoint” blocking the firm's entry into spot crypto products.
- The company is building a new, in-house system to allow clients to manage crypto alongside traditional assets like stocks and bonds.
- The firm's RIA custody division has grown to over $5 trillion, with Wurster emphasizing a strategy to deepen relationships with the 16,000 RIAs on its platform.
- Schwab reported strong third-quarter earnings, with total net new assets increasing 48% year-over-year to $134.4 billion.
- Some financial advisors have expressed concern over the new leadership's direction and communication following the departure of longtime RIA advocate Bernie Clark.
Schwab's Deliberate Approach to Cryptocurrency
Ten months into his role as CEO, Rick Wurster provided the clearest indication yet of Schwab's plans for digital assets. He directly addressed the timeline for offering spot cryptocurrency access, explaining that the company is taking a measured approach to ensure a seamless client experience.
“There's nothing from a regulatory standpoint, standing in our way,” Wurster said in response to an analyst's question. This statement removes regulatory uncertainty as a reason for the delay, placing the focus squarely on technological development.
Building a New Platform from Scratch
Wurster explained that Schwab is not simply plugging into an existing system but is instead undertaking a “completely new build” with an internal technology team. The goal is to create a platform where clients can access and manage digital assets directly within their existing Schwab accounts.
“Our offer will allow clients to access crypto directly alongside their existing investments and our banking capabilities, which will be a strong differentiator,” he noted. The process involves creating proprietary books and records, followed by a phased rollout that includes pilot programs and testing with small client groups before a wider launch.
Industry Perspective on Schwab's Crypto Strategy
Industry experts believe Schwab's careful strategy, while slow, could be impactful. Tyrone V. Ross Jr., a consultant with 401 Financial, suggested there might be “nervousness around making sure the tech and operations are seamless.” He added, “I do think when they launch it will be a game changer and will be worth the wait.” Ric Edelman, CEO of the Digital Assets Council of Financial Professionals, who is advising Schwab, confirmed that the regulatory picture is becoming clearer, allowing firms like Schwab to engage in an “unprecedented way.”
Strengthening the $5 Trillion RIA Business
A significant portion of the analyst call was dedicated to Schwab's Advisor Services division, which serves independent RIAs. Wurster boasted about the division's growth, which recently surpassed the $5 trillion milestone in assets under custody.
“I think our offer is far and away the best in the industry, and that's -- I think that's reflected in the new new assets that you're seeing,” Wurster stated. He outlined a strategy to build a broader support system that goes beyond basic custody services.
New Initiatives for Financial Advisors
Schwab is rolling out several initiatives aimed at deepening its relationships with the 16,000 RIA firms on its platform. These include:
- Expanded Lending Support: Providing more robust lending capabilities for advisors and their clients.
- Alternatives Capability: Increasing access to alternative investment products.
- Mutual Fund Platform Growth: Expanding its institutional, no-transaction-fee mutual fund platform to include nearly 60 different fund managers.
- Advisor ProDirect: A new service designed to help breakaway advisors establish their independence.
Wurster also highlighted the firm's role in supporting the largest advisor transition in industry history by bringing the firm OpenArc onto its platform in September.
Schwab's Impressive Q3 Financials
The company's strategic focus is supported by strong financial performance. In the third quarter, Schwab exceeded analyst expectations with total net new assets surging 48% year-over-year to $134.4 billion. The firm also added 1.1 million new brokerage accounts and saw daily average revenue trades jump 30%.
Concerns and Questions Within the RIA Community
Despite the CEO's focus on the RIA sector, some advisors have expressed unease following recent leadership changes, particularly the departure of Bernie Clark, the former head of Schwab Advisor Services. Clark was widely seen as a key advocate for independent advisors within the corporation.
Timothy Welsh, founder of Nexus Strategy, noted the uncertainty. “The real danger here for advisors is that they do not know who Rick Wurster is and where he stands on supporting their businesses,” he said. Several advisors reported receiving no direct communication from Schwab about the leadership transition.
The Future of Custody Fees
A central question for many RIAs is whether Schwab will alter its long-standing fee structure. The RIA custody business, while massive in assets, generates a lower revenue yield for Schwab (approximately 10 basis points) compared to its retail business (around 30 basis points). This disparity has fueled speculation that the new leadership might introduce asset-based custody fees.
“When advisory assets already yield barely one-third the revenue of retail...will Wurster have to help reinvent the custody model as well?” asked Michael Kitces, a prominent industry commentator and head of planning at Buckingham Cos.
While some advisors worry about new costs, others suggest that a transparent fee could fund higher service levels. However, any move to add custody fees would break a long-held pledge made under previous leadership.
Shirl Penney, founder of Dynasty Financial Partners, offered a more optimistic view, expressing confidence that Wurster is motivated to support RIAs. “I would expect to see some new and creative significant wins under his leadership,” Penney stated, citing Wurster's diverse background as a potential asset for the RIA community.
