Jill Schlesinger (2:33)

Maybe this is really apropos of you.

Podcast Co-host (2:35)

Figuring out do I want to continue managing my own financial life? Do I need the assistance of an advisor? Well, we have a great guest to discuss that very conundrum Today we are joined by Jonathan Beatty. He is head of Schwab Advisor Services, meaning he's the guy who oversees the business that serves 16,000 independent advisory firms.

Jill Schlesinger (2:59)

And what I think is important about.

Podcast Co-host (3:01)

Registered investment advisors is that you know you're dealing with a fiduciary. You know, we talk about that all the time. So today we're so delighted to have somebody who is on the ground talking to these folks and here to explain why working with a registered investment advisor might be something that you should consider. So here is our interview with John Beatty.

Jill Schlesinger (3:22)

Okay, now what you guys don't know is that I am very well steeped in this world. So listeners, I, Jill Schlesinger was a registered investment advisor and an independent one for 14 years. And so I love this topic. And so often John, people come on the program and they talk to us about having an advisor and they mention the name of some big huge firm like a wirehouse, like big names that you know and familiar with. And there's always this moment where I'm like, like, like a little pause and I'd love for you to talk a little bit about what it means to be an independent registered investment advisor versus one of the advisor types who's affiliated one with one of these big wirehouses.

John Beatty (4:11)

You keyed in on independents. Registered investment advisor. Independence means that advisors, these advisors, they own their own companies, they are independent, meaning that they have access to the full breadth and depth of financial services across the whole industry and they can go wherever it's necessary to take care of their clients, whether that's investment capabilities, their own infrastructure, technology as well as tax planning, estate other needs for clients. That's the beauty of independence is advisors get to work with who they think would be best to serve their investor clients. And that's why we relate so well to independent advisors. And as you know, independent advisors are also fiduciaries. Fiduciaries are bound to do what's in the best interest of their clients as it relates to the legal term. And I would invite any of your listeners to Google Financial Fiduciary and learn more about what it means to be in relationship and on the same side of the table. Advisor, investor. Looking out at the financial services community, finding the best solutions for the portfolio, for the planning process, for the estate process, tax included in that. The other thing I love about independent advisors is they tend to be comprehensive, meaning they cover a wide range of needs for investors. And as I mentioned that tax estate for financial planning, it's not just about investments when you work with a independent.

Jill Schlesinger (5:49)

Advisor, as I talk to a lot of people who are in this environment, the independent ones, they're also a little bit more, how can I put this? More like collaborative with one another. So I was at this big conference of registered investment advisors, and I was struck by the ability of them to share information with one another from different firms. Like, hey, I have a client who's doing this. What do you doing with this? That there are a lot of practice groups, that there are people sharing information and the best practices for each firm and how they kind of exchange information. And it's a little, you know, it's very different than the, you know, eat.

Podcast Co-host (6:28)

What you kill mentality of a lot.

Jill Schlesinger (6:31)

Of the firms out there that are, you know, have those captive folks in their organizations now. I guess the other thing to point out is that because of that fiduciary duty, and don't you worry, my people know about fiduciary. I think that that is an important aspect. But the independent part to me also means that they are not. They're not forced into presenting a certain format for their clients. They're not forced to say, oh, use this, or you can only sell this, or this is the only way to structure a portfolio. You have to go this way. So I have found, and correct me if I'm wrong, that a lot of the, the power of being independent is that you also have independence of solutions for your clients.

John Beatty (7:18)

It is a community. Although they are independent from each other and independent from Charles Schwab or any other major financial institution, they are a community. And we love the fact that we serve this community of 16,000 independent advisors across the United States. And they do lean on each other and they do share best practices because they're all interested in doing what's best for, for their clients. There's very little competitiveness within the community of independent advisors. In a lot of ways. They look out at the world as a profession and want to extend their services, that fiduciary model to more American investors. You can't lean into the concept of independence any more than what you just said. I think of the philosophy of open architecture, where these independent advisors have the whole world at their fingertips and can hire and fire asset managers based on performance or capabilities. They can really with anything within their business model. They can change it out for something better on the behalf of their investor without having to check in with the corporate entity. And that's the difference between being independent versus being an employee of a larger financial institution.

Jill Schlesinger (8:42)

Let me ask you the one part of the independent advisor world that has changed so much in the I can't believe the 17, 18 years since I was in the business is that now a lot of these independent folks are. They're seeing their firms either merge or they're selling to private equity. And how has that changed, shifted the landscape of independent advisors out there in your mind, Joe?

John Beatty (9:11)

You talk about your 16 or 17 years. I've been at Schwab for 28 years working with independent advisors. And Schwab has been serving the RA industry for nearly 38 years now. So we have a long history with this space and are very proud to be a part of it. And yes, there is M and A activity happening at a accelerated pace in the RIA space. It's very dynamic. I think it's due to all the success that RIAs are having in taking more share of individual investors every year from the traditional space. That speaks to their capabilities and their momentum in the marketplace and how investors are really opening up to the idea of the benefits of working with independent advisors. Many of these firms were started 10, 15, 20 years ago and are going through what any business would go through, which is succession. A founder who's in their 60s is looking for ways to take care of their employees as well as their investor clients and may merge or sell their business to a larger firm. I remember when I started in this space 28 years ago, it was all about investments. And about five or 10 years in planning came onto the the offer and that became more important. Now it's a state and more firms are expanding into tax services. I talked to a firm just a few weeks ago that hired a college counselor as a value proposition to their clients who are, you know, have juniors and seniors in high school who are going through the selection process of college. So the breadth and depth in this space is growing and complexity brings the need for scale. But at the same time, I know independent advisors are always thinking about how they can drive on personalization in their client relationships. And as independent businesses entrepreneurial, they can really personalize the experience and be boutique to the investor client, meeting them where they are and their needs at that particular time.

Jill Schlesinger (11:25)

You know, it's also interesting is that if you're an independent advisor, you've broken away from your big firm. You say, I'm going to start a business. And they feel, you know, somewhat shackled to the, to the larger firm. But if you're breaking away and you're starting from scratch, besides the fact that you're the custodian, as Charles Schwab, what else are you doing for these firms?

John Beatty (11:47)

Well, you hit the nail on the head there, Jill. And not only are investors waking up to the independent model, we're seeing more and more advisors waking up to the idea that I want to be an entrepreneur and I want to start my own firm and be independent, operate in this open architecture model for the benefit of my client, or potentially join an independent firm as a employee advisor and leveraging their capabilities. So it's quite dynamic. And Schwab, we're very focused on delivering brilliant experiences from a custody solution capability to independent advisors and their clients, reducing the friction of doing business. We really are the wind in the sail of RIA firms to help them go to market and compete. We bring the scale of a Charles Schwab and they bring the personalization of a small business in a community just down the street from their investor client.

Jill Schlesinger (12:46)

Now here I am talking to you after a few incredible years for stock investors. Okay? And so I think the danger of these periods is that everybody thinks they're a genius. And so if you are looking at your career and you look back at these times where we've had big, big upward bull momentums, what can you do.

Podcast Co-host (13:12)

If there's someone doing it themselves and.

Jill Schlesinger (13:15)

They'Re like, I mean, I'm feeling really good about myself, I'm so smart. But what is the decision point you think is out there with people who say, I've been doing it myself, now.

Podcast Co-host (13:27)

I maybe need some help?

Jill Schlesinger (13:28)

Or is it that they have to get their butts handed to them after a market meltdown and then they ask for help?

John Beatty (13:35)

I think it's always smart to ask and seek guidance and support, whether you're managing the portfolio yourself or thinking about hiring an advisor. Even in good times and bad times, I will tell you, I've seen it over my 28 years. Independent advisors do their best work in difficult markets because they're able to keep their investors attention on the long term. And we know investing is as much technical in selecting the right parts of the market and your allocation. But it's equally as important to have the right risk tolerance and psychology related to riding out market storms. And certainly advisors add a lot of value and perspective in those difficult times as well as in the good times. I know advisors today are actually talking to their clients about the idea that these are good times, but it won't always be like this and we have to steady ourselves and, and prepare the portfolio and our own psychology to weather the future market storm that is inevitable at some Point, no one's predicting when it would happen. But we know markets don't just go straight up. So we always have to be thinking about how are we taking advantage of the good times and how are we preparing ourselves when the wind turns against us.

Podcast Co-host (14:53)

It used to feel like only rich.

Jill Schlesinger (14:55)

People could work with an advisor. I mean, let's be honest, that used to be like kind of the feel of the business, right? And now we've really come into a period, I think that is democratizing financial advice and also making people aware that your world is more than your investing world. And I think that that message is coming through.

John Beatty (15:16)

I think we've done a tremendous job in doing that for investors of all shapes and sizes. We continue to lean into that to be an innovator, to be a disruptor, to help all people have access to investing and the world changes, right. And new things come on the horizon. And I would just encourage, and as I do my 20 somethings and their friends, that you have a thoughtful process to how you manage your money.

Jill Schlesinger (15:51)

What do you think is the big risk for this industry right now, for the investment advisory industry? What do you see as a risk out there?

John Beatty (16:00)

The continuation of educating people of all walks of life on investing is the mission and the purpose here. Anything that distracts us from that is a risk. I think artificial intelligence is exciting. It will be a new way of augmenting relationship and maybe doing things more efficiently so that you can repurpose your human talent towards more value added experiences. So we're excited about that. Certainly we want to make sure we don't fall behind in that as an industry or as a business. We talk a lot to RAAS about the importance and more than 50% of them are using artificial intelligence in some way in their business already. So as always on the cutting edge of this space.

Jill Schlesinger (16:47)

I mean, I think that one of the cool things about the again, the independent investment advisor and again, I just came off of like talking with a whole bunch of them recently. They're not showing fear of things like AI. They're saying, oh my gosh, this is amazing.

Podcast Co-host (17:03)

This might make my clients experience of.

Jill Schlesinger (17:06)

Going through financial planning a lot easier. So I think that sometimes the big firms get a little bit fearful and the independent ones are saying, you know, hey, I can use this. This can be a tool where someone can populate a form just to get.

Podcast Co-host (17:25)

An appointment with me and give me a few pieces of data and we.

Jill Schlesinger (17:29)

Might be able to guide them on their journey in a really efficient way. I only worry that you know, maybe we're going to lose this idea of like what it's like to build a.

Podcast Co-host (17:40)

Financial plan from the bottom up.

Jill Schlesinger (17:42)

But on the other hand, you know, I lived through a time when we used to do financial plan on an HP12C calculator. And then software was introduced and just made your life easier and you got plans done faster. So it wasn't like the end of the business.

John Beatty (17:57)

Joe. We think it's a winning combination of people and technology that will help investors achieve their financial dreams. We need to make sure we pay attention to both of those things. Leveraging the best in technology to augment experience, to make it easy to do business together, to reduce risks. AI can be a great risk management tool for advisors, whether that's in the portfolio or fraud risk. The other thing that we're very focused on is making sure that we lean into the importance of the EQ in relationship with clients. And, you know, that's a difference maker. Certainly you want to have expertise around the individual securities in a portfolio or how the plan all fits together. But investing is as much emotional as it is technical in so many ways. And that's why I see an importance in making sure that we have a fueling of both of those things. We just hosted our impact conference in Denver and had 5,000 plus professionals there. 2,800 of those were advisors. And they were as much interested in how AI will fuel their client experience, but also how they continue to get better as professionals in serving their clients. So I love that energy. If you're a young person listening to this and you're thinking about investing, but also your career, if you're an advisor who's maybe not excited about where they are today, I think find your passion, lean into that. You can do great things when you believe in what you're doing and you have the energy that passion brings to you, to your career and other aspects of your life as well. And that's what has made me so proud to work for Charles Schwab and to be a part of the RIA space. I just love working with advisors. We have 16,000, but I try to talk to an advisor every week because I know it happens out there in the marketplace every day between our advisors and their investors.

Podcast Co-host (20:04)

Thanks so much to John Beatty for joining us. If you'd like to learn more about how you can find an independent advisor, visit. Find your independent advisor.com that's findyourindependentadvisor.com and of course, if you're working with an advisor and you want us to help weigh in on whether or not this person is worth the money or not, or whether you need them or not, or what you should do next. Get in touch with us. Go to jillonmoney.com and click the Contact Us button. You can subscribe to us on the Odyssey app or wherever you find your favorite podcasts. As always, we'd like to thank thank the folks who make this show possible on Fridays. Our music is composed by Joel Goodman. Mark Telercio is our executive producer and the king of all things web. We are distributed by the lovely folks at Odyssey. We always ask that you do something nice for someone else today. Change your work. Change your wealth. Change your life. Thank you for listening and we'll talk to you on Monday.

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