Schwab ends sub-$5 million referrals to RIAs in 2027

Charles Schwab & Co. will stop sending sub-$5 million referrals to RIAs. From 2027, those clients stay inside its own wealth-management business. The change came in a memo to Schwab Advisor Network firms that Citywire obtained and published this week. The memo arrived six days after Chuck Schwab signed a full-page Wall Street Journal ad. That ad promised thousands of new hires on top of the 3,000 financial consultants already in place.

The memo takes aim at a program built on a two-decade trade. Tim Welsh, president of Nexus Strategy, calls it 'The Toll Bridge Collapses' in a white paper. His account of the old bargain: 'For two decades, the deal looked simple: Custody your assets with a discount broker, and it will send you clients.' Schwab built the Advisor Network in 2002 on that premise, Welsh argues, and RIAs built entire growth strategies on top of it. The deal, he writes, is 'now being unwound.'

The network's ranks have thinned through the TD Ameritrade merger. RIABiz puts the remaining participant count between 100 and 150 firms. The new policy cuts the quality of what flows to them. Sub-$5 million leads now go to Schwab's wealth office. The change starts in 2027. The memo promises that $10 million clients will keep coming. $25 million clients, too — a consolation with a heavier minimum attached.

The hiring plan sets the backdrop. Three thousand consultants are on staff today. With 'thousands' more to come, that is at least a 66% expansion if the word carries its nominal weight. Schwab uses its founder sparingly, and the timing matters. He fronted the zero-commission moment in 2019. He reassured investors during the 2023 bank liquidity scare. The ad belongs to that category of message. The order of announcements matters, too: the ad spoke to the retail market, the memo to the custody base.

Some large RIAs are unbothered. Mariner Wealth and Creative Planning have essentially told Schwab to bring it on. Mariner Wealth, run by Marty Bicknell, has $632 billion in assets under advisement and management. Creative Planning, run by Peter Mallouk, has more than $780 billion in combined assets. Mallouk's stated view: 'Our relationship with Schwab has never been better.' The smaller firms that leaned on SAN as their lead-generation arm do not have that cushion. An analyst quoted in RIABiz's related coverage warns they could be 'building on rented land.'

The program's decline did not start with this memo. SAN was Schwab's link between retail brokerage and external advisors, and both the TD Ameritrade merger and the rise of Schwab's own advice business had already narrowed the program. The memo accelerates that narrowing and makes it explicit.

Valuation consequences deserve more attention than the referral threshold. Organic growth built on a pipeline you do not control carries a cost structure that looks attractive only while the pipeline stays open. A client who enters through that pipeline may later move up to the $10 million tier. It could reach $25 million. Losing the entry point means RIAs buy growth from their own P&L, through marketing or recruiting, at a price the market will now start to model. M&A buyers are likely to ask how many new clients came through SAN and what the substitute channel costs. The memo just supplied a reason to apply a discount.

The custody value proposition moves in the same direction. RIAs have long accepted Schwab's platform partly because the referral flow was part of the compensation. With that source gone, the platform must stand on its own — pricing, service, technology. That is a different sales pitch, and every advisor in the network now hears it.

None of this should shock anyone. The referral program was a strategic courtesy from a discount broker that once needed an advice ecosystem, not a contract. Schwab is now both custodian and advice competitor, and the memo makes that explicit for smaller clients.

RIAs have until 2027 to build a client-acquisition machine that does not route through the custodian. Some already own one. The rest just got the price of their next client.