The nation’s largest discount brokerage firm, Charles Schwab & Co., is cutting 19 retail branches in favor of smaller, one- or two-broker boutiques, a move the company says will cut costs and more effectively serve clients. Analysts think it will help the firm, which has been hurt by a slow year in retail-investor trading.
Schwab says it plans to close 19 branch offices, convert 39 full-sized branches into smaller “satellite” offices and open 15 more satellite offices for a total of 54 satellites, in an effort to “rebalance and optimize branch resources…that will focus on building stronger client relationships.” Currently, Schwab has around 330 financial consultant employees in 260 branches nationwide in its “Advisor Network.”
At Schwab’s annual Impact convention for its independent-but-affiliated financial advisors, Charles Schwab, the company’s founder and current CEO, said the company would try to cut expenses by 20 percent. He also said the company had grown “too complicated.” The firm has said it estimates its cost-cutting efforts will result in about $275 million in annual savings by the end of 2004.
Schwab Executive Vice President Walt Bettinger said, “These new offices provide a cost-efficient way for us to have a branch presence in a local community, and the cost savings support our ability to offer competitive pricing for our clients.”
Bettinger said clients have primarily asked for two things from the firm in recent years: lower prices and “a direct personal connection with someone at Schwab.” Matt Bienfang, an analyst with TowerGroup, a Boston-based research firm, says the moves are an overall plus for the firm. “It sounds a little bit like they’re getting back to the old Charles Schwab vision,” he says.
Bienfang says reacquiring a personal touch is crucial for the firm and applauds the move as a way to fix an overcomplicated customer base. “I think they’re looking to allow the customer to determine the relationship,” says Bienfang.
According to the press release, the new satellite offices will be staffed by one or two Schwab FCs. Additionally, for clients outside these branch areas, a one-on-one relationship with a Schwab FC will be provided through a call center. Though pricing for this kind of dedicated call center relationship was not immediately clear, Bienfang thinks it will prove intriguing because it’s so rare. “For most nontraditional brokerage firms, this hasn’t been available—a customer would call and get a new guy every time.”
For clients who need a traditional, full-service financial advisor, Schwab Institutional offers managed-account and custody services to about 5,000 RIAs.