Schwab shifts its strategy on its massive Intelligent Integration

Schwab evolves to a platform-of-platforms strategy for technology rather than hand-picking best-of-breed applications

Wednesday 6.6.12 by Lisa Shidler

Schwab Advisor Services has shifted strategies on its giant Intelligent Integration initiative, and rather than picking the best of breed in technology categories, the firm is looking to select the industry’s top platforms.

It’s no secret that Schwab has been slow it roll out its new technology project — which centers on CRM integrations — but Neesha Hathi, vice president of technology solutions, explained at a phone press conference on Wednesday that the company’s strategy for choosing technology has shifted. See: Schwab taps Tamarac as its next integration partner.

Categories are unimportant

At the beginning, she said, Schwab wanted to offer specific technologies in various categories, such as financial planning software, but she said, Schwab quickly discovered that the categories are no longer as important. What’s most important is to choose the best vendors in the industry, Hathi said.

“That’s a bit of an evolution for us,” she said. “The foundation is still the same because it’s based on feedback from advisors.”

Schwab has forged formal ties with SalesForce, Salentica (a provider of advisor-modified Microsoft CRM) and Junxure. Tamarac’s integration with Microsoft CRM impressed Hathi. See: Schwab chooses some giant software partners, apparently with big RIAs in mind.

Tear down the categories

Brian Shenson, Schwab’s managing director of advisor technology, explained after the conference call that advisors don’t simply want the best of breed in one technology, they are seeking the industry’s top technology providers.

“In the past, we thought about it in categories of trading or financial planning but more and more we’re seeing that advisors are moving across these applications to achieve something for client service. The lines are blurring across the categories. The fact of the matter is providers recognize that lines aren’t so clear cut and their platforms are evolving. We’re not as focused on making sure we’ve got three trading systems in the program or three financial planning systems. We’re much more about making sure we’ve got the right platforms or technologies that advisors are going to rely on to run their businesses.”

Tamarac is platform leader

Hathi said that the best example of the firm’s new strategy is its relationship with Tamarac. Schwab chose Tamarac in May and while the company’s core capability is rebalancing, it offers so much more to advisors and is considered one of the leading providers in the industry. See: Schwab taps Tamarac as its next integration partner.

“They’ve created an integrated platform that’s gained a lot of traction in the marketplace,” she said. “Our focus is trying to identify platforms so we can identify integrations of the platforms that are leading the marketplace.”

The integration between Schwab and the Seattle-based division of Envestnet Inc. makes real-time custody data from Schwab Advisor Services available within the Tamarac Xi web-based platforms Advisor CRM and Advisor View. See: What Tamarac’s overhauling of its Advisor Xi has yielded.

Slow and steady carries risks

Still, Schwab’s slow and steady approach has its critics. On one hand, there are some merits to taking a thoughtful approach, says Franklin Tsung, vice president of AppCrown,LLC, there are some merits to taking a slower deep dive.

“You are trying to handle data from different software providers. It’s not easy and the platform play is smart. You bet on the market leader in their respective category. I would applaud the slow but profound strategy for a custodian — otherwise you risk moving before the market matures,” Tsung says.

Franklin Tsung: Schwab needs to talk less and do a little more about what they've been talking about.
Franklin Tsung: Schwab needs to talk
less and do a little more
about what they’ve been talking about.

But he acknowledges that Schwab is taking some risks and the strategy could easily backfire.

“Their approach is very different from everyone else out there,” Tsung says. “Schwab needs to talk less and do a little more about what they’ve been talking about. It’s better to ship something out then wait to come up with a perfect solution. You’ll never get a perfect solution. You need something that’s good enough for everyone to use and then enhance it.” See: How AppCrown got a big RIA footprint overnight by handling Salesforce implementations.

Strategy sounds familiar

Schwab’s competitors are way ahead of the firm in terms of integration.

And, Alois Pirker, research director at Aite Group., says that RIAs do need an integrated platform and not simply an “island of solutions.”

But he points out that this strategy is not that different from what Fidelity did with WealthCentral.

“Now, custodians can do the integration themselves, like Fidelity did with WealthCentral, which bears the risk that they will fit well for some RIAs but not so well for others. Or, you have a multiple platform strategy, where you partner with several and RIAs can choose. Clearly, the latter approach gives you less control over the platforms, however, allows you to get away from “owning” the platform,” Pirker says.

Fidelity ahead in the race

Fidelity has also been unquestionably an early leader to the integration game by choosing best of breed technology vendors Siebel, Advent and NaviPlan in 2009. But the company now has about a dozen firms on its WealthCentral platform. See: Fidelity is set to add Envestnet, Redtail, Morningstar, AppCrown and Salesforce to WealthCentral.

When Fidelity launched Wealth Central in 2009, there were just 50 advisors using it. Now, more than 2,000 do.

“Fidelity took the lead in developing technology for RIA workstations when we introduced WealthCentral — the industry’s first web-based wealth management platform that integrates RIAs’ most critical operational systems,” says Fidelity spokesman John Eidson.
“Advisors want choice and flexibility in their technology platform. We offer our RIA clients that choice through a multitude of technology providers in a single interface that provides increased access and deeper integrations with third-party providers.”

“Fidelity Institutional Wealth Services has more than 3,300 clients, and the vast majority of our RIAs use the platform,” Edison says, adding that more than 40% of users have downloaded a WealthCentral mobile app.

Competitors open up integration

TD Ameritrade has taken a far different approach than Schwab with its Veo Open Access and has integrated with more than 60 companies — small and large alike.

“We’re getting best of breeds as well as smaller innovative products,” says Jon Patullo, managing director of technology product management. “Our advisors can leverage very deep integrations with these providers.” See: TD Ameritrade’s promise of creating an RIA version of Apple’s app store may have found its prototype signing.

Rather than simply choosing the best companies, Patullo says advisors very clearly shared with the firm that they wanted choice and flexibility.

“Some of them do want us to help them out and others have unique needs but we realized one solution wouldn’t fit everyone,” he says. “We wanted a true open platform and we’ve seen a lot of success.”

Schwab’s integration going well

Hathi also gave an update of her firm’s integrations with Tamarac, Salesforce and Junxure, and said things are going smoothly. See: What Neesha Hathi has to say about Schwab’s oh-so-slow-but-steady technology initiative.

For example, she said, in recent months Schwab has sold 20 units of Integrated Office, which is the turnkey platform of

“It’s fabulous and right on track with where we wanted to be,” she says. “Advisors selecting that platform are really broad in terms of diversity. Some are transitioning from wirehouses and sometimes they’re just advisors who don’t like what they have today and they want something that is simpler, easier and more integrated and that’s what Integrated Office is providing.

Big uptick on Junxure and sales

Hathi said that since February more than 250 advisors have begun using the integrated offering with Junxure and Saleforce and says the split is about 50-50 between the two companies. “We’ve even launched more enhancements to Salesforce,” she said.

Workflow library

Hathi said the company has also continued to bolster its workflow library. “Whenever I talk to clients about this, I say, 'Don’t roll your eyes, you are going to like workflows. And once I show you the blueprint you’ll be shocked and amazed.’”

There will be a complete library of workflows by the end of the month — a total of 28.

Mobile apps

Hathi said that RIAs are increasingly interested in using tablets and mobile technology in their day-to-day operations. Schwab plans to introduce a mobile iPhone app this month and an iPad app by the end of the year. “The iPad seems to have such an overwhelming penetration in the marketplace,” Hathi said.

Tech talk

The firm has also been arming its relationship managers with talk about Schwab Intelligent Integration. Hathi said that the firm’s 75 relationship managers are spending a great deal of time helping RIAs understand the firm’s new technology offerings.

The firm also hosts solutions conferences and intends to do about 12 of them, with a total of 3,000 attendees, in July.

Neesha Hathi | Brian Shenson | Franklin Tsung | Alois Pirker | Jon Patullo

Schwab | Tamarac | AppCrown | Aite | TD Ameritrade Institutional