After lunch with Bernie Clark, the future of RIAs seems to have no limit

Bernie Clark holds one of the most important jobs in the RIA business as the head of an asset custodian with $600 billion of assets.

It’s a big challenge and clearly the executive vice president of Schwab Advisor Services relishes his role. He accepts the inconvenience of living in Arizona, being professionally based in San Francisco and having his customers spread all across the United States.

Clark says he gets to spend on average a day a week in Arizona; he was headed to Chicago for a meeting with Schwab’s Advisory Board after our lunch and to meet with big Chicago clients.

The result of this schedule is that when I missed an opportunity to have lunch with him in June, the next spot on his San Francisco calendar wasn’t open until September. It was worth the wait.

Clark fits the role of an executive in a big position that involves keeping thousands of clients – often with differing needs — happy. He is tall, good-natured and full of energy. Clark engages constantly with questions but listens to answers without interrupting or looking distracted.

Clark has a roving intelligence that forms ties between disparate elements and shows that he is familiar with specifics of RIA firms and principals he works with and niceties of technology and programs. He is also eager to have larger conversations about the macro forces that can lift the entire RIA industry or form roadblocks.

I met Clark at Town Hall Restaurant, which is equidistant between his company’s headquarters building on Main Street and BlackRock [in San Fran by dint of acquiring Barclays Global], and I was late because parking was bad enough that even the lots were full. Schwab PR director Lindsay Tiles accompanied Clark. We were talking shop in no time with the waitress making circles and us not figuring out what to order in the meantime.

Why the title’s not that important

It’s easy to see why Clark ended up in his current position. Charles Goldman, former executive vice president of Schwab Institutional, left the RIA unit’s top spot in November 2008 and the company – instead of naming a replacement – expanded the duties of Jim McCool to become head of all institutional services including RIA custody and corporate and retirement services. It was characterized as a streamlining move.

Yet Schwab needed someone to serve as the point person to drive the business and be accountable to advisors. With McCool’s backing, Clark fell naturally into this challenging role. Aside from the fact that he was head of sales and relationship management, advisors immediately embraced his presence in the new role and he is well-liked and respected by the ones I speak to.

I’ve shared a couple of meals with Clark before but not since he had become head of the Schwab RIA business. I was interested to see how he was wearing his new position and how he was approaching his new role.

My takeaway is that – still in his first year – he is absorbing information as quickly as humanly possible. He has also been part of some big-time decisions, like whether to a.) embrace the hybrid [See: A giant is awakening in the hybrid RIA market b.) seek to take industry leadership in technology [See: Schwab unveils a plan to create a grand ecosystem of top technology vendors to RIAs]

What I realized after leaving the lunch was that Clark was the better reporter than I was. He asked me questions about virtually every aspect of the business and so I ended up doing more talking than listening.

Clinical trials

A central question Clark asked me was what I thought the RIA firm of five years from now was going to look like. I told Clark that I think the RIA business consists of thousands of firms that, like laboratories, are conducting clinical trials into what works. Some are ahead of others.

Within five years, Clark told me, he believes that wirehouses will have declared themselves to be RIAs. This statement is made as a quip but not as a joke. It’s clear that Clark is busy envisioning just how his company needs to manage circumstances when the full-service brokerage industry truly capitulates.

He wonders if a time won’t come, sooner than later, when – like the relationships Schwab has with many IBDs – wirehouses won’t consider allowing their advisors to use Schwab for fee business.

One reason for the general nature of some comments: Clark allowed that much of the future will depend on what happens in Washington and that the future will remain somewhat clouded until new rules of the road for advisors – if any – are established.

- He doesn’t think that RIAs will be clustered in a handful of rollups based on their recent slow growth, though he takes their presence seriously in the marketplace. He noted the rapid growth of HighTower and the impressive buying power of Focus Financial.

- Clark mentioned that he is eyeing how RIAs will find their place in international markets. We discussed how some advisors are starting to specialize in straddling the U.S. and Canada, partially because I’m working on an article about that. True to form, he was personally familiar with the RIAs I’ve been interviewing.

China in the forecast

- He told me how he’s aware of more and more RIAs making exploratory trips to China. They’re not exactly signing leases on office space but they’re getting a feel for the place and the trips are not all about gaining a cultural holiday experience.

- Clark seemed most interested when I told him a couple of anecdotes about people I know personally who had chosen to use Schwab competitors for RIAs assets. In neither instance did he get defensive. In fact, he just wanted more details. In one instance, my friend who is an RIA chose Fidelity because Schwab’s salesperson didn’t seem as interested. Another personal friend keeps all RIA assets with a local bank and is almost oblivious to so-called RIA custodians.

- In each case, Clark expressed regret about the situations and said there was an opportunity for Schwab to do better in those instances. Schwab can become a better outsourcer for small banks and he says that he’s concerned that small firms understand that Schwab takes their concerns seriously.