What Chuck Schwab's talk showed about his complex relationship with RIAs

Brooke’s Note: I hope Chuck Schwab never retires. The company may find its way like a Steve Jobs-less Apple but Chuck can never be replaced, not even close. He likes golf. He retired once before. You always wonder when he might make it his day job to swing a nine iron. What’s interesting is that he has never appeared to make a big fuss over RIA clients — often not even attending EXPLORE or IMPACT conferences over the years. But the truth is that advisors seem to more than appreciate him anyway.

He’s 74, fit and tanned, and isn’t there for a lot of thank-you-for-your-business chatter.

Chuck Schwab spoke to RIAs at yesterday’s IMPACT conference with the zeal of a true believer, one with the bona fides to say what he wants, in the order he wants, with the emphasis that he prefers — and conventional wisdom be damned.

His eyes flashing from behind his steel-rimmed spectacles and with an RIA-stands-for-you pin on his lapel, Schwab expressed fervently bullish opinions on the stock market and let advisors know that he is fed up with liberal approaches to just about everything.

Pressed by CNBC’s Maria Bartiromo about income disparity in the United States after he expressed dismay about Occupy Wall Street, Schwab didn’t flinch. He said that robust economic growth was the only way to boost standards of living. See: In a rare IMPACT appearance, Chuck Schwab predicts a 'significant turn’ for the better.

Chuck the iconoclast

RIAs said afterwards that they appreciated that Schwab kept his comments about the good old days to a minimum, unabashedly spoke his mind and kept them focused on the future.

In other words: Chuck Schwab spent an hour espousing views that people could agree or disagree with, but left everyone agreeing that he is an iconoclast who speaks mind and does it shamelessly. He is not trying to win a popularity contest — indeed, at times it wasn’t clear if he realized that he was essentially engaged in a client conference before 2,000 RIAs representing hundreds of billions of Schwab assets.

But if RIAs can appreciate anything, it’s personal transparency and a fierce independent streak. Schwab exudes both. That’s why they’re in his cheering section.

Competitive fire

From his purchase of U.S. Trust to overseeing ever-higher levels of counsel being offered in Schwab branch offices, Chuck Schwab has executed a series of decisions over the past decade or longer that could be construed as contrary to RIAs’ best interests.

“I love competition and I love to compete — in golf and in business. It keeps us on our toes,” Schwab says.

Still, a closer look at some of Schwab’s statements show a greater sensitivity to advisors and their interests than one would realize based on listening to his, at times, gruff, irreverent manner of speaking.

Schwab says RIA assets are at about $3 trillion and likely will double every 10 years. He made mention of using financial advisors but he made more references to the investment research he does on his own.

A crucial service

I could be wrong about how Schwab manages his — according to Forbes — $4.7 billion or so of net worth, but I suspect that Schwab’s “play money” is the bulk of his assets and that his RIA-managed assets are a modest piece of the pie. He suggested as much by saying: “Any advisor would look at my portfolio and say: What a mess.”

I recently wrote an article about the value proposition of a financial advisor. In his speech yesterday, Schwab offered up his own value proposition of RIAs — a tip of the hat to his audience.

“We financially rely on capital. If we don’t have capital, we don’t have an economy. People who are great shepherds of capital are very much required and this room is full of them…I think it’s absolutely a crucial service.”

Symbiotic relationship

I got positive feedback but virtually no additional thinking about my article from unusually quiet sources. I should have called Chuck. What he understands is that good RIAs serve not only clients but the broader world. Every careful decision about how, when and where to invest for clients also has ramifications for the investment itself, whether it be municipal bonds for funding fire engine purchases in Kalamazoo or private equity for getting a medical device start-up off the ground.

RIAs making well-informed investing decisions enrich both the investor and the investee. An enriched investor can positively impact the world — paying for education, giving to charities and putting land into nature preserves.

The closest Schwab comes to thanking RIAs for the $700 billion they bring to his company is to refer to “a great symbiotic relationship.” Schwab is saying, and not so subtly, we need you — but you need us, too.

Schwab also paid the ultimate backhanded compliment to RIAs with his more general praise of what makes our economy tick: successful entrepreneurs.

Strange – and creative – people

“It comes from the innovation of strange individuals. I knew Steve Jobs a little bit. Strange guy.. He created demand out of thin air.”

Schwab’s praise for Jobs was the only time he used a reverential tone.

The message to the RIAs in the room was that he respected them as entrepreneurs. Of course, he is a bit of an entrepreneur himself — another way of tying himself to the audience.

Nor did he minimize challenges faced by RIAs as entrepreneurs: “The advisor’s role today is as complicated as any time in my lifetime.”

It is when you have clients like Chuck Schwab.