Schwab ends sub-$5-million RIA referrals starting in 2027

Charles Schwab will stop referring sub-$5-million prospects to outside firms in the Schwab Advisor Network starting in 2027, keeping that business for its own wealth-management arm. The change arrived in a memo to SAN principals on Aug. 18, a document Citywire first obtained and RIABiz reported. Schwab's memo promised that $10-million and $25-million referrals will keep going to the roughly 100 to 150 firms left in the network.

Five days earlier, the company ran a full-page Wall Street Journal ad signed by founder Charles Schwab saying it would hire "thousands" more financial consultants on top of the 3,000 on staff. RIABiz calculates that if "thousands" means 2,000 or more, the advisory sales force grows by at least 66 percent. The founder is rarely deployed this way — he was the public voice in 2019 when commissions fell to zero and in 2023 when the firm's banking business went through a liquidity scare. His appearance, so close to the memo, gives the referral change a degree of weight.

SAN was built in 2002 on a simple trade: custody assets at the discount broker and receive client introductions in return. Tim Welsh, president of Nexus Strategy, argues in a white paper titled "The Toll Bridge Collapses" that the arrangement is being dismantled at a pace that should worry every RIA relying on it. The network has already been reduced to its current count by the TD Ameritrade merger and by Schwab's own earlier cuts to its referral programs.

Two large RIAs in the channel are not reacting as if the flow matters. Mariner Wealth, led by CEO Marty Bicknell, oversees $632 billion in assets under advisement and management. Creative Planning, led by CEO Peter Mallouk, holds more than $780 billion in combined assets. RIABiz reports both executives essentially told Schwab to bring it on. At that scale, custodian-originated clients are a minor share of new business, and their own brands and marketing operations supply the growth.

The pain is more likely to show up at the middle of the network. A $300 million practice that took in two or three sub-$5-million clients a year through SAN now has to source those relationships another way. The $5-million floor sits right where clients do their accumulating: a 45-year-old with $500,000 can plausibly be worth $5 million by 55 and $10 million by 65, and under the new rule Schwab controls that first decade. The $10-million referrals still promised are introductions to prospects the RIA has not worked with before — colder than the old low-end referrals, which came with years of trust already in motion.

The first step for any SAN firm is measuring dependence. Owners should look at new clients and new assets over the past three years and isolate the custodian's contribution. If the share is meaningful, the sub-$5-million piece ends in 2027, and the replacement work becomes a two-year project. The sources are the standard ones — estate attorneys, tax CPAs, commercial bankers, insurance brokers, and direct requests for introductions from existing clients. A specialty that makes a firm the obvious call in one industry is the same hedge, with a longer shelf life.

Schwab has made its decision and put a date on it. Firms that use the next two years to diversify their lead flow will meet 2027 with other channels in place. Firms that postpone will spend that year competing for the clients the custodian no longer shares.