Scale insulates Schwab from low-margin custody competitors
The bull case for Schwab's RIA custody dominance rests on its massive scale, making it highly difficult for lower-scale entrants to compete on thin margins.
The argument
The speaker argued that competitors like Goldman Sachs and Robinhood (via TradePMR) face steep economic hurdles because Schwab operates its advisor business on a thin 10 basis point margin. This scale (managing $5.5 trillion in advisor assets) makes it incredibly difficult for new entrants to gain profitable traction.
The thesis, stress-tested
✓ What validates it
- ✓Continued net new asset growth in Schwab's RIA custody segment
- ✓Competitors scaling back or exiting their custody initiatives due to low profitability
▸ Risks discussed
- ▸Aggressive pricing or subsidization by competitors to buy market share
- ▸Esoteric lending demands from ultra-high-net-worth clients that competitors might service better
Hear it yourself
"And so in addition to the RIAs growing, we're taking share. And so that combination led to really strong growth in the adviser space last year. I'm glad you said that you're taking share because whenever I see these numbers, a billion dollars a day into this or that, I'm like, where, like, literally, where is the money coming from? So Josh mentioned this, 42% growth in advisory assets. Is some of that coming over? You said the the fiduciary model is winning. Is some of that coming over from the wire side? Is it some of it coming from people that finally decide they need an adviser? Like, 42% on the asset size."
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