Schwab Survey Finds SEC Harmonization of Rules Could More Than Double Compliance Costs for Independe

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Schwab Survey Finds SEC Harmonization of Rules Could More Than Double Compliance Costs for Independent Registered Investment Advisors

Schwab Requests Commission to De-Couple Rule Harmonization from the Call for a Uniform Fiduciary Standard

SAN FRANCISCO--(BUSINESS WIRE)-- According to a Schwab Advisor Services survey of independent registered investment advisors (RIAs), harmonization of rules for broker-dealers and RIAs on average could more than double compliance costs for RIAs in the first year of implementation while providing very little positive benefit to their clients. On average, RIAs estimate a 63% increase in time spent on compliance-related issues and an increase of $175,000 in first year compliance costs and $117,000 in each subsequent year. As noted in the results, an increase in compliance costs and time could put advisors in the difficult position of raising fees or decreasing client service.

Schwab commissioned the survey on behalf of RIAs and submitted the results along with a comment letter to the SEC in response to its request for data on the duties of brokers-dealers and investment advisors. Schwab continues to express support for an appropriately tailored uniform fiduciary standard when RIAs and broker-dealers give advice, but is concerned about the burden RIAs would bear if broker-dealer rules in areas such as licensing, supervision, and books and records are imposed on them.

"We appreciate the deliberative approach the SEC is taking, which gave us the opportunity to reach out to advisors to comment on rule harmonization," said Bernie Clark, executive vice president and head of Schwab Advisor Services. "While we collected the data in response to the SEC's request, we will use the process to educate RIAs on the potential rules and help them consider the cost and burden of compliance for their clients and their businesses."

Based on the data, the potential rules outlined by the SEC could result in over $1 billion1 in additional costs for the RIA industry. Additionally, many advisors (88%) believe that their clients would be negatively impacted by rule harmonization. The majority of RIAs (85%) have indicated that they would have less time to spend with their clients, 71 percent believe their clients would end up paying more for investment advice, and 63 percent of RIAs believe they would deliver less customized client service if the rules were implemented.

In its letter to the SEC, Schwab observed that "most RIAs are small businesses in the commonsense use of that term, and such a significant increase in regulatory burden would have to be justified," and asked the Commission to "de-couple its consideration of the uniform standard of care from other potential rule areas for harmonization." "Investors deserve advice that is in their best interest and free from conflicts," said Clark. "But RIAs and broker-dealers are fundamentally different business models and therefore should not be governed by the same set of rules."

The SEC will use the data and analysis in Schwab's letter, along with the input from others, to decide whether to propose new harmonized rules in the future.

For more information about rule harmonization, read this white paper.

About the Survey

This survey was conducted for Schwab Advisor Services by Koski Research. Koski Research is not affiliated with Charles Schwab & Co. Inc. All data are self-reported by survey participants and are not verified or validated. Over 800 advisors participated in the survey between May 28, 2013 and June 7, 2013. The data noted in this press release represents participating RIAs with $90 million or more in assets under management. Survey results are attached to this release.

About Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients' goals with passion and integrity.

More information is available at Follow us on Twitter, Facebook, YouTube, LinkedIn and our Schwab Talk blog.


Through its operating subsidiaries, The Charles Schwab Corporation (NYS: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at and

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1Costs to the RIA industry overall would depend on whether the SEC would apply new harmonized rules to some or all RIAs.


Charles Schwab
Rob Farmer, 415-667-0083
The Neibart Group
Sarah Gormley, 718-875-2122

KEYWORDS:   United States  North America  California


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