With the job cuts, branch closings and refocusing currently under way at Charles Schwab & Co., there's one area that seems to be safe. Despite the firm's move to replace former CEO David Pottruck with founder Charles Schwab in July in an effort to get back to the firm's discount roots, Schwab's Institutional unit isn't going anywhere.
Schwab announced in August that it is closing 53 of its branches, 16 percent of its total. But Schwab Institutional — which provides back-office and technological support for more than 5,000 advisors (down from 5,900 last year) — has been one of the few bright spots for the San Francisco-based broker since the market's downturn.
As such, the shake-up at the top (and the expected move back to the firm's roots) is not likely to affect the firm's emphasis on the unit.
“It has been a highly successful venture for Schwab,” says Michael Hecht, an analyst for Banc of America Securities. “That's an area that has continued to work. If they keep their focus on that, there's no reason that shouldn't continue to be productive.”
Schwab Institutional President Deborah McWhinney — who declined comment for this story — has been one of the firm's shining stars in recent years, and the unit's client assets recently surpassed the $300 billion plateau, which accounts for 30 percent of the firm's total assets.
“I think they're going to be making huge changes everywhere but here,” says one advisor. “We've been told that we're a vital part of their business, and, honestly, I believe them.”
But with the future of Schwab anything but certain, and many analysts doubting whether the firm can crawl back to its previous heights, some wonder whether the unit, productive or not, is with the right team in the first place.
“Honestly, that's the only real good business Schwab has anymore, and they're still losing ground,” says one analyst who didn't want to be named. “They've had more success there, and it's one of their few legitimately profitable business. But they're not growing as fast as their competitors, and at Schwab right now, being one of the ‘least terrible’ units is certainly faint praise. I think they're all in trouble.”
But the advisors in the unit are certainly not worried — for now.
“I get so much attention from [the home base in] San Francisco,” says one. “Without me, and all of us, I think they'd get nothing but bad news. We'll feel good about the whole thing.”