“Clients First” Says Next Generation of Independent Investment Advisors

SAN FRANCISCO & LUBBOCK, Texas--(BUSINESS WIRE)--Helping people in a meaningful way and putting clients’ interests first is what attracts students most to the independent investment advisory profession, according to a May 2008 survey of 160 financial planning students conducted by Schwab Institutional and Texas Tech University’s Division of Personal Financial Planning. More than half (51 percent) of students surveyed cited this as a primary career motivator, and more than three times as many said the ability to help clients is a more important factor than the chance to make a good living, which ranked second on the list of benefits (15 percent).

“According to Schwab’s most recent benchmarking study, 72 percent of advisor firms cite staffing issues as a key barrier to growth, making the next generation of advisors an important resource pool for firms to tap.”

“Putting clients’ interests ahead of everything else is one of the key cultural principles of the independent investment advisory industry,” said David Welling, Schwab Institutional vice president of advisor practice management. “It’s wonderful to find that putting clients first is a significant motivator for the next generation of advisors, because one of the most important issues for advisors looking to hire staff is finding employees who fit with their firm’s culture.”

Smaller Firms and Competitive Compensation at Top of Students’ Minds

As they plan to enter the workforce, respondents also displayed a strong preference for smaller and more specialized advisory firms. More than 70 percent of students surveyed indicated that they would prefer to work at a boutique firm that specializes in either financial planning or managing client investment portfolios. The majority of students (57 percent) felt that a firm with fewer than 35 employees would be the best fit for them, while just seven percent said they are looking to work at a larger firm with 75 or more employees.

When asked about the most important factors in choosing a specific employer, the majority of students (58 percent) said that annual salary and total compensation package are key, followed by the ability to have a healthy work/life balance (49 percent). Sixty-two percent expected the annual income for their first full-time position following graduation to be between $35,000 and $55,000.

Next Generation Optimistic and Eager

Students participating in the survey were overwhelmingly upbeat (96 percent) about entering the investment advisory industry in the current market and economic environment. And they were reasonably optimistic about prospects for the market: when asked about the direction of the S&P 500 over the next six months, 62 percent said it will go up.

The survey also identified the roles students expected to play during the beginning of their careers. In the first two years of employment, 64 percent of students expected to handle back-office operations such as managing client trade requests and conducting data entry. Nearly the same number (63 percent) expected to be involved in some way with the creation of client financial plans. Only 15 percent thought they might have direct responsibility for managing a group of clients during their first two years of employment at a firm, and just 10 percent expected to be involved in the business management of the firm.

“Students preparing to enter the investment advisory industry seem to be very level-headed about their expectations for entry-level roles and responsibilities,” said Deena Katz, associate professor of personal financial planning at Texas Tech University. “But we also found that they have a strong desire for quickly increasing levels of responsibility, independence, and client contact.”

She noted that after four to five years, students surveyed expected to have significantly greater responsibilities and frequent client interaction. Eighty-two percent said they expected to be managing portfolios directly with clients, nearly twice the number that expected to do so in the first two years of employment (43 percent). Seventy-three percent expressed the belief that they will be independently responsible for a group of clients, 61 percent expected to be charged with finding new clients, and 57 percent anticipated they will have some degree of responsibility in the business management of a firm after four to five years of employment there.

Students See Networking as Key in Job Search

When asked about the strategies they are using to connect with potential employers, nearly 90 percent of students said that word-of-mouth networking with professional contacts, family and friends is the most useful tool in their job search. Students also indicated that internships (73 percent) and on-campus job fairs and employer interviews (69 percent) are helpful in helping them get introduced to employers.

“Independent advisor firms are seeing continued strong growth, which is driving their need to hire additional staff and build capacity,” noted Welling. “According to Schwab’s most recent benchmarking study, 72 percent of advisor firms cite staffing issues as a key barrier to growth, making the next generation of advisors an important resource pool for firms to tap.”

Texas Tech University is not affiliated with The Charles Schwab Corporation.

About Schwab Institutional

Schwab Institutional is a leading provider of custodial, operational and trading support for independent fee-based investment advisors. Since 1987, Schwab Institutional has supported independent investment advisors by offering support and services to help grow their businesses and help their clients reach their financial goals. As of March 31, 2008, client assets custodied with Schwab Institutional stood at $569.7 billion. These assets, managed by the approximately 5,500 independent advisor firms Schwab Institutional currently serves, represent approximately 40 percent of total client assets custodied with The Charles Schwab Corporation as of March 31, 2008. Schwab Institutional is a division of Charles Schwab & Co., Inc.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.2 million client brokerage accounts, 1.3 million corporate retirement plan participants, 332,000 banking accounts, and $1.4 trillion in client assets as of April 30, 2008. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Schwab Institutional division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at www.schwab.com. (0508-0845)