As our clients will know, our primary custodian for clients’ investment accounts is Charles Schwab & Co., Inc. (“Schwab”). Schwab has a retail presence (ie: individuals open brokerage accounts and trade/manage them on their own), as well as a very meaningful Advisor Services practice (where they diligently support Registered Investment Advisors (like Windermere) as we work with clients whose assets are custodied at Schwab)

In late 2019, Windermere’s Schwab relationship manager asked me to join the Advisor Services Client Experience (CX) Panel. The purpose of the panel is to gain insights and feedback from a diverse group of advisors on a variety of topics that are top of mind for Schwab’s Advisor Services Group leadership team.

Our first meeting was to be in person during April 2020, and of course, that meeting and all subsequent ones during 2020 and 2021 were moved to a virtual environment. While we were able to make some progress in that format, it was wonderful to be able to connect and collaborate as a group in person this past week in sunny California.

Our two-day agenda was chalked full of topics and the dialogue was exceptionally interactive, unfiltered, constructive, and dynamic. As you can understand, our conversations are subject to a Non Disclosure Agreement and as a result, I cannot comment on the specific items discussed and feedback shared.

However, I thought it may be interesting for clients to hear five general/high-level trends that were apparent from the agenda. While details are purposely lacking, hopefully this will give you some insights and high-level perspectives

1.) Strength of RIA industry – It is no secret that more and more advisors – and clients – are seeking the independent advisor relationship (being sold advice, as opposed to being sold a product on commission). This growth is likely to continue – which is a good sign as firms such as Windermere will continue to have access to top-tier tools and resources from their custodians that can be deployed on clients’ behalf

2.) Schwab TDA merger – it has been almost two years since the merger was announced and the transition remains in process (to be completed in 2023). Schwab has a helpful website with more information on the merger here . As it relates to our clients (who are already on the Schwab platform), Windermere anticipates beneficial changes (such as implementation of TDA best practices and technologies over time). Your account numbers and web access/credentials will all remain the same. We will keep in touch on this topic as the transition approaches if there are items that are of importance to you

3.) Ongoing digital enhancements – if you have worked with us to open an account, process a money movement, or change your account address lately, you will know that Schwab is consistently making considerable investments and improvements in its digital processes. Schwab continues to place a strong emphasis on e-authorization (ie: where you log into schwaballiance.com to approve an action related to your accounts) as that is by far the most secure method available. As your advisor, Windermere will continue to emphasize the use of digital tools and remains happy to walk you thru the process every step of the way

4.) Emphasis on service – As you can appreciate, it has been a very challenging for every financial services firm as they navigated a confluence of events including COVID, shift to remote work, tight employment market, and unsteady markets/geopolitical events. Schwab was not immune to any of this. Please know there has already been marked improvement in this area at Schwab (that Windermere has experienced first hand) and with what we heard, it will only get better. And remember – Windermere is able to act on your behalf for most tasks (either complete it or send along for your e-authorization) so please reach out to us first for any and all requests!

5.) Ongoing fraud threats – this was the session I most wanted to emphasize to clients. Unfortunately, there continues to be ongoing fraud attempts across financial institutions – and Schwab is not immune. The attempts continue to expand and evolve – especially around move money transactions (ie; wires and ACH). For several years, a common fraud was a fictitious email sent from a client’s email (by a hacker) to an advisor, requesting a wire transfer. Given added controls to address this (such as call-back requirements and e-authorization), fraudsters have now moved on to other strategies. The latest is hacking of third party emails. An example shared was a fraudulent email sent to a Schwab client from a realtor with real estate closing instructions. The client then sent the instructions to their advisor for processing. It was discovered (too late) that the realtor’s email had been compromised and the wiring instructions were in fact fraudulent.

I don’t share this story to scare you – but rather to remind you that it’s essential to stay alert and aware – and hyper vigilant when it comes to move money transactions and cyber security protocols. A few things to keep in mind.

1.) Windermere will always call you to verify move money instructions you request us to process via email, text, or any non-verbal communication. While the verification can slow the process down and seem like duplicate efforts, it is non negotiable and is for your protection

2.) We strongly suggest you independently verify any wire instructions you receive. (In the example above, this fraud would have been caught had the client called the realtor to verbally verify the routing instructions – or if they had checked the routing number matched the end institution)

3.) Visit Schwab’s dedicated fraud/cyber website for more case studies and best practices

4.) Take advantage of all readily available protections – such as avoiding the use of public wifi and turning on dual factor authentication on Schwab Alliance, your email, and any other applications or websites that offer it (opt for token over SMS/text where possible)

5.) Stay tuned – we will continue to share Cyber/Fraud updates on a go forward basis. Our best defense remains our collective awareness and diligence

I have personally been a Schwab client for almost 30 years and Windermere has been an Advisor Services client since its founding in 2010 (Ken’s prior firm was also with Schwab from 2000-2010).

Despite that long-standing relationship, we evaluate and review our custodial relationship every year to ensure it is in the best interest of clients, and time and time again, we come to the same conclusion. There is no other custodian we would select for our client accounts and our personal investment accounts.

Schwab is a best-in-class custodian, putting the client’s needs front and center and is fully committed to the RIA/independent model for that very reason. It was an honor to participate in this discussion and share valuable feedback that will position them to continue to do so going forward.

Reach out if you would like to share any Schwab-specific feedback or if you have any questions on the topics above!