Schwab Institutional Reports Identify Pricing for Profitability, Talent Retention as Critical Business Issues for Advisory Firms

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SEATTLE, Sept. 26 /PRNewswire/ -- According to two new research reports from Schwab Institutional, two business management issues have emerged as definitive drivers for advisory firm success in today's increasingly competitive market place: effective pricing and talent retention. Two new Schwab Market Knowledge Tools(TM) (MKT) reports examine these mission-critical issues in detail. Pricing Strategies for Maximum Success The just-released Pricing Strategies for Maximum Success white paper developed by Schwab Institutional and Moss Adams LLP guides advisors though the process of designing and implementing optimal pricing strategies. The report finds that despite the importance of pricing to advisor businesses, most fee-based independent advisory firms do not analyze their pricing when establishing fees for new clients or considering changes to their current pricing model. Citing pricing as a complex issue that requires careful evaluation of both a firm's cost basis and the competitive landscape, the report points to cost analysis as a vital and ongoing process for determining profitability of existing relationships and properly pricing future relationships. Among the highlights of the report: -- The top 10% of firms (in terms of profitability) strictly adhere to a minimum fee requirement. -- While the average advisory firm spends 42% of its revenue on professional compensation, only 16.4% of firms track how their professionals allocate their time. -- Professionals at every level within a firm typically spend at least 30% of their time on non-client activities. The report outlines four steps for implementing a practical pricing strategy: -- Track the time each professional spends servicing each client. -- Compare cost-of-service to revenue generated. -- Look for large-scale patterns that suggest the need for firm-wide repricing. -- Adjust sub-optimal clients before adjusting pricing across the firm and consider options such as AUM (assets under management) fees, retainers, project fees and hourly billing. The report works in tandem with an Excel-based pricing tool that gives advisors access to the formulas discussed in the report. Best-Managed Firms: Recruiting and Retaining Top Talent According to another new MKT report from Schwab Institutional titled Best- Managed Firms: Recruiting and Retaining Top Talent, human capital management is the number one priority for the most successful firms in the industry. The report was compiled from interviews with the 27 "Best-Managed Firms." The best firms were selected from the participants in the 2005 FPA Compensation and Staffing Study conducted by Moss Adams, based on a composite score of profitability, productivity and human capital practices. Key findings include: -- In 2004, Best-Managed Firms increased their client base about 11 percent in gross terms through acquisition of new clients. Referrals from existing clients were the primary source of clients, accounting for 45 percent of all new client relationships. -- The second largest source was referrals from professionals outside the organization (CPAs, lawyers, etc.), which accounted for 24 percent. The third was active business development done by principals, who brought in 16 percent of all new clients. -- Best-Managed Firms, on average, spend 16 percent more on employee benefits than other firms, and their employees are more likely to be offered retirement benefits through a 401(k) program. -- Fifty-eight percent of Best-Managed Firms have hired a former intern into a permanent position, while just 40 percent of other firms have done so. -- Twenty-six percent of the Best-Managed Firms sought to add a specialized business developer in 2005. The report details the steps that advisory firms can make to avoid the high cost and disruption of employee turnover, including offering competitive pay, aligning compensation to career development, creating a positive culture, and providing employees with new challenges. "As independent investment advisory firms experience unprecedented growth, finding and retaining the people who can help take the firm to the next level becomes critical," said Ann Simon, vice president of Schwab Institutional. "Advisors are looking for new ways to successfully grow their business and manage their human capital, while keeping an eye on the bottom line." Pricing Strategies for Maximum Success and Best-Managed Firms: Recruiting and Retaining Top Talent are the latest in a series of Schwab Market Knowledge Tools(TM) (MKT) reports, an ongoing program of industry research, white papers and how-to guides from Schwab Institutional designed to keep investment advisors on the forefront of trends and competitive challenges facing the industry today. Offered exclusively to Schwab Institutional clients, the MKT program delivers relevant and timely information on managing independent advisory firms for maximum success. About Schwab Institutional Schwab Institutional, a division of Charles Schwab & Co. Inc., is a leading provider of custodial, operational and trading support for independent fee-based investment advisors. Client assets custodied with Schwab Institutional increased 18 percent to $365 billion between June 30, 2004 and June 30, 2005. These assets, managed by the approximately 5,000 independent advisor firms Schwab Institutional serves, represent approximately one-third of total customer assets custodied with The Charles Schwab Corporation as of June 30, 2005. About Moss Adams Moss Adams LLP provides accounting and management consulting services to advisory firms throughout the US, Canada and Australia. With a particular expertise in the financial services industry, Moss Adams has provided consulting services to more than 1,200 investment management firms, broker- dealers and financial advisors on matters related to compensation, organizational design, valuation, mergers and acquisitions, financial management, strategic planning and leadership development. Moss Adams is the eleventh largest accounting and consulting firm in the U.S., with a staff of 1,100, including 180 partners. For more information on Moss Adams, visit http://www.mossadams.com/industries/sin. About Charles Schwab The Charles Schwab Corporation (NYSE / Nasdaq: SCH), through its operating subsidiaries, provides securities brokerage and financial services to individual investors and the independent investment advisors who work with them. With over 7 million individual investor accounts and more than $1 trillion in client assets, The Charles Schwab Corporation is one of the nation's largest financial services firms. Its subsidiary Charles Schwab & Co., Inc. (member SIPC) provides a complete range of investment services and products, including an extensive selection of mutual funds; financial planning and investment advice; retirement plans; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent fee-based investment advisors through its Schwab Institutional division. Its subsidiary Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. The corporation's other operating subsidiaries include U.S. Trust Corporation (member FDIC) and CyberTrader(R), Inc. (member SIPC) .These companies' Web sites can be reached at http://www.schwab.com/, http://www.schwabbank.com/, http://www.ustrust.com/, and http://www.cybertrader.com/. (0905-1867) DATASOURCE: Charles Schwab CONTACT: Alison Wertheim of Charles Schwab, +1-415-636-5812 or ; or Tyler Bradford of Makovsky & Co., +1-212-508-9637 or Web site: http://www.schwab.com/

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