Schwab Unveils ‘Education Coaches’ In Push To Win DIY Clients
Many Schwab retail clients checked into their accounts on Friday morning to see a photo of nine friendly and relaxed-looking adults with a button saying, “Meet the Education Coaches.” Advisors can expect to see more such initiatives attempting to build bonds between self-directed retail clients and Schwab employee advisors.
The move comes at a time when the giant discount brokerage has also said it intends to hire thousands of advisors as employees to work directly with individual investors, a move some independent financial advisors view as a competitive threat.
Schwab’s rollout of the education coaches is part of an effort by the retail division to strengthen its engagement with retail clients through expanded advisory offerings. “Get to know the Education Coaches who can help you boost or build your knowledge and skills,” the tagline reads. The site also offers links to webcasts, on-demand playlists and an in-person events calendar.
Some industry experts believe market realities are forcing Schwab to seriously strengthen its game in the advisory space. When the Federal Reserve raised interest rate sharply in 2022, it exposed the over-reliance of Schwab and other brokerages on interest income.
For most of the previous decade, when the Fed kept interest rates near zero, investors didn’t care very much if they earned a negligible return of maybe 0.2% on a sweep account or, say, 0.4% in a money market fund. Then as rates climbed in 2022 and 2023, the differential between yields on sweep accounts and money market funds expanded dramatically, and cash-sorting opportunities became obvious to investors—and a serious problem for brokerages including Schwab. Its stock tumbled more than 30% in early 2023 and stayed depressed for more than a year.
“They pretty much have to, as their dependence on net interest income (harvesting end-client’s uninvested cash) will get disrupted by AI, regulators, competitors or all three, leaving them very exposed as to being a sustainable company going forward,” Timothy Welsh, president of Nexus Strategy, said. “As a result, their only revenue growth opportunity are advisory accounts that pay basis points (SWA) and is why they are shrinking their RIA referral program and hiring at scale.”
But advisors who see Schwab’s increasingly aggressive push as a betrayal are fooling themselves, in the view of some industry observers. Schwab’s traditional roots have always been tied to self-directed investors, they say.
“What surprises me is when people think Schwab’s push into retail is a recent event,” said Mark Tibergien, the former CEO of Pershing Advisor Solutions and an industry consultant. “This is in their DNA, at the core of their business model, the reason for their being. They were direct to consumer long before they became institutional with an RIA custody offering.”
Schwab is one of the top “three most recognizable brands” in retail investing, he added. It shouldn’t come as a shock that their offering has become more full-service over time, he said.
Tibergien acknowledged this has “always been a dilemma for advisors who use them,” and on occasion Schwab has “crossed the line and alienated some RIA firms. But being the dominant provider in both retail and custody gives them an edge over other competitors.”
A major risk for advisors that Tibergien sees now is that the expansion into advice may truly confuse the clients of RIAs who get Schwab statements while seeing promotions and advertising all over the place. This begs the question: Why pay extra if they can go direct with Schwab?
But one issue that remains is what services Schwab can offer self-directed investors that will be profitable.
The education coaches are an amiable group, and it doesn’t appear Schwab is going to convert them to a revenue source. Of the nine coaches featured, the first is Barbara Armstrong, who is called “Queen of the Basics.” Armstrong, according to the site, can help you on everything from “placing your first trade to buying your first stock.”
The nicknames assigned to the other eight coaches are intended to provide retail investors with an idea of their expertise so they can listen and learn online. James Boyd is the Trend Follower who is “all about reading price action, spotting trend reversals, and identifying breakouts.”
Michael Fairbourn is the “Technical Guru” who “knows how to spot price patterns and can help you do the same.”
Rachel Dashiell is a “Trading Trailblazer” who “you can count on her for a fresh perspective on the market.”
Kevin Horner is the “Self-Taught Strategist” who can “help you manage your trades—and emotions.” A click on the link to Horner says he “feels the best part of his job as a coach is guiding traders to help cut through the market noise and understand how their emotions can impact their success.”
Other coaches include Ben Watson, the “Market Edu-tainer,” of whom the site says “with him if you’re laughing, you’re learning.”
There is also Connie Hill, the “Chart Connoisseur, and Brent Moore, “your Greeks Guide.”
The site says that after “studying with [Hill], you’ll never look at charts the same way again.” Meanwhile, Moore specializes in teaching investors “everything and anything about options.”
The interplay between Schwab and the independent advisors who use it as a custodian remains a two-way street. The firm actively attempts to bring some of the strategies RIAs are offering to advisory clients to the discount brokerage’s most affluent retail clients who aren’t currently using an advisor affiliated with Schwab.
Schwab’s historical record of late-cycle expansion is decidedly mixed. At the end of the tech boom in the late 1990s, the firm hired thousands of new employees, only to lay off an estimated 25% of its workforce in 2001.
