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Will wirehouses switch to RIA model? Schwab’s CEO has doubts

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CHICAGO — Worried that wirehouses are going to get fiduciary religion and convert to the RIA model?

Don't be, says Charles Schwab CEO Walt Bettinger.

The odds of the large wirehouses switching business models are "zero," Bettinger said, responding to a question at Morningstar's annual investment conference. "It would be a complete disruption of their entire economic model."

Schwab's entire annual revenue (over $8 billion), he said, is "less than one-fourth of a wirehouse's expenses."

However, wirehouses "do recognize the problem [of not being a fiduciary]," Bettinger asserted. The major brokerage firms will increasingly try to downplay clients' relationship with their advisor and shift the allegiance to the firms' brand and offer more advisory planning services, he predicted.

Responding to a question about the potential threat of advisors, Bettinger said there wasn't any.

He described robo advisors as "niche players in a tiny segment that has some appeal to some individuals." Most financial service consumers, he went on, are going to want "broader engagement with humans. The value of a live experience will be shown very clearly in coming years," Bettinger said.

The Schwab executive also said he didn't see much downward pressure on advisory fees, but he did see "upward pressure on the depth and breadth of services provided."

Clients are now expecting quality digital service, real-time notifications, complete automation and transparency, he added.

Clients also now recognize how difficult it is to outperform the market, Bettinger said. That's a positive development, he explained, because it has shifted attention from market performance to planning.

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