How Tech Drives Innovation & Accelerating Through Integration with Andrew Salesky

Jack Sharry: Hello, and welcome to WealthTech on Deck. The focus of our podcast is to have conversations with industry leaders on strategy around wealth tech today, where it is headed. Today we are talking with Andrew Salesky. Andrew leads digital advisor solutions at Charles Schwab where he oversees the suite of technology platforms used by more than 7500 independent advisory firms who work with Schwab. Andrew, thanks for joining us today.

Andrew Salesky: Well, it’s great to be here. I appreciate the invite Jack.

Jack Sharry: This will be fun. I’m looking forward to our conversation. So Andrew, before we get started, on your perspective on the wealth management business and where it’s headed beyond, can you provide a high level review of your career, I know you’ve done a bunch of things at Schwab, and maybe a kind of a cliff notes version of where you’ve been and what you’ve done.

Andrew Salesky: Yeah, no happy to do that. And sometimes it scares me when I say I’ve been at Schwab now over 25 years. So I did have a life. Prior to Schwab, I was with McKinsey and Company for seven years largely doing financial services work. But I’ve had a good long run at Schwab, I like to say I’ve had big jobs, small jobs. Some of the bigger jobs I you know, a variety of branch leadership and sales leadership roles, ultimately leading the branch network across the country. I spent six years running schwab.com and related retail applications back in the days when apps were just starting. And then I’ve had small jobs, startups within Schwab, I helped create what we call Schwab private client, which was the first fee-based offering at Schwab. The first time we asked clients to pay for Schwab advice, I the opportunity really is championed by Chuck and Walt directly. After 40 years of running retail branches, we decided, let’s give franchisees a chance. And we created what we call an independent brand services. So now, roughly 75 branches across the countries are run by independent franchisees. And then I’m based out of San Francisco, we’re surrounded by digital natives. And so a few years back, I was asked to be our first global data officer effectively looking at what we should be doing with our data. And from that, I transitioned into my current role, which I’ve been in now for roughly three years, supporting the digital platforms that advisors use to interact with Schwab. So we call it digital advisor solutions. But it’s a great digital opportunity.

Jack Sharry: That’s great. So you’ve been around and we like to refer to it as the confluence of digital and human advice and on all sides of that and leaving an important aspect. And we’ll talk a little bit up sure about that. Now, I understand that you have a little integration going on. So maybe talk about what you’re working on currently. And some of the things that are keeping you occupied if not up at night.

Andrew Salesky: Yeah, well, integration is, you know, job one now at Schwab, you know, you started your intro with that, you know, I support a certain number of advisors that’s now with integration. 13,000 advisors, is the combined organization. And, you know, what I like to say to my team is integrations not a distraction. It’s an acceleration, it’s really bringing a level of investment that is unprecedented for Schwab in the digital advisor space, and we’re able to accelerate our roadmap. So in all different areas, whether that’s digital account open things we’re doing. Now, in terms of move money, investment management, integrations with third parties, really, all the various areas we focus on within digital support for advisors are being accelerated, you know, by virtue of of the integration work, we recently shared, that we’re now you know, you know, expecting that we will get to broker dealer consolidation in 30 to 36 months from our legal day one, when we first announced legal day one that was back in October of last year, we said 18 to 36 months to get us to a broker dealer consolidation, what we call client day one, recently, we said we’re going to be more on the outer end of that 30 to 36 months and, and really, the rationale for that is because we’re really trying to create a great experience when we bring together these two broker dealers. And also we’ve just seen such incredible growth, you know, in this industry, really over the past three to six months. And so, at this stage, we’re already outpacing some of the projections we made back when we were doing the due diligence around the integration. So we want to plan for that scalability. We want to have a great client experience at CD one and that’s why now we’re looking at 30 to 36 months. Now, just a couple of other thoughts I would add on the integration is now this is a it’s a challenge or an opportunity. It’s not your typical integration because we’re bringing together two strong powerhouses in turn As a digital capabilities, there’s not one platform to go to, we’re really trying to bring together elements of both and, and create not just a best of both, but really a better of both type environment. And so really, there’s great capabilities on the Schwab side. And there’s great capabilities on the TDA side. And that driving that integration for that client day one is our focus and, and then mail. Last thing I’ll add is just the biggest surprise for me, so far working, you know, particularly with many of my new TDA colleagues is, it’s just the quality of the people. It’s no surprise, we were duking it out, you know, pre integration, a lot of common thoughts about where the industry is growing, what technology is needed, but just a spirit of collaboration and teamwork and doing what’s right for the client. That makes it very easy for us to work together, I, I can’t talk about past integrations Schwab’s gone through and in my 25 years, and I would say from a people and cultural perspective, this one clearly is going the best.

Jack Sharry: That’s great to hear. So I want to go back to two different things. So in your role at Schwab, do you support all advisors, including the folks on the phone, the folks in the branches of Schwab and the franchisees as well as the folks out in the raa world? Is it all the above?

Andrew Salesky: Now, when I use advisor I was thinking about fee based independent advisors. So we have a separate team that supports our internal, you know, what we call financial consultants, folks that work in our private client offer and other managed offers. I will say though, I am part of the digital services team, I report to our Chief Digital Officer Nisha Haathi. Within her team, we’ve got we’ve centralized all the digital capabilities across the firm. So I work very closely with my colleague, Zack Gibson, who supports the retail business. And so we’re constantly looking for how we leverage common capabilities, you know, really accelerates, you know, both of our deliveries when we can do it once and use it twice. And so that’s really a key thought process. But my team has full focus on those 13,000 fee-based independent advisors that we’re lucky to be the custodian for.

Jack Sharry: Great. Another question. You mentioned, the rapid growth, and I’m hearing that around the industry. And the statistics I’m reading are that due to COVID, that the number of people retiring is accelerated in that people are retiring sooner, either they said the heck with that I’m done. Or they’ve been laid off because of downsizing or what have you. Is that what you’re finding is, is that the driver here, people that are retiring sooner?

Andrew Salesky: Yeah, I mean, it’s hard for me to correlate it. I do think there’s that type of impact Jack going on. We’re just seeing a growth in the business. That’s unprecedented. I mean, we’re seeing quarters of performance, we just announced q1 results. And in terms of net new assets, new accounts. I mean, we’re doing a level of performance and a quarter that used to be what a year was. Now, part of that is because we’re a consolidated organization. But it is just dramatic growth. And we really saw it coming out of COVID in q4. q4 was an extremely strong quarter for Schwab, on all fronts, whether its existing I, you know, Ras or breakaways, on all fronts. We were really strong in q4, and that’s continued into this year. So we like to think it’s a vote for the independent, you know, that this, this is the model, that’s probably the fastest growing model and financial services, retirees probably helping that. But it’s more that fiduciary standard and desire to be in that service model that’s really creating this great opportunity.

Jack Sharry: Great. Well, obviously, technology plays a critical role. That’s what you do. That’s what you oversee. Talk a little bit, if you will, about where you see this headed, maybe at an industry level, I’m not looking for proprietary secrets, but rather, as you’re bringing together certainly TD has some great capabilities, swabs, certainly great capabilities. Talk about a little bit about how that comes together. You say it’s working well. How does that translate? Well, how will that transform how Schwab delivers to these 13,000 Plus RAs in the marketplace?

Andrew Salesky: Yeah, I mean, it. It’s tough to predict the future clearly. But you know, maybe I’d first comment on some of the trends we’re seeing and maybe share a little bit of data center backup some of those trends and then I’ll, I’ll get to some of the prognostications maybe a little bit, but maybe just some of the trends we’re seeing, even clearly, we don’t know operate in a silo or we’re influenced by trends that are going on broadly, you know, in, you know, in the economy and age of sound that we see that are probably impacting where we need to focus going forward is, you know, clearly there’s a health wellness trend, you referenced COVID And clearly people are concerned about the personal health, but we’re also seeing that that’s having a bridging over into their financial health, and people are very concerned about Now am I set up for retirement or my key goals and whatnot, is driving up heightened level of engagement, which we think is good, clearly, there’s demographic shifts, these aren’t new, they don’t change overnight. But, you know, a stat I saw recently is that, you know, women now are responsible for about 10 trillion in assets, financial assets. And the expectation is that will triple in the next 10 years, triple over the next 10 years 30 trillion, that will, women will have lead responsibility for. So we need to prepare for that, and advisors need to prepare for that, and maybe the last or global trend, and, you know, this is influenced by what we do, you know, digitally and all our various interactions, it’s just that there’s rising expectations, we like to say that your last best interaction is your next minimum expectation, your influence, whether it’s at Amazon experience, or whatever it might be, and, you know, you want an easy fast, and you want a personalized, and that has implications clearly for what we do and in financial services. And, and last but not least, is just the rate of digital adoption. I mean, that’s been another beneficiary of COVID. I mean, I, you know, one of the stats I saw recently was, you know, Disney plus achieved in five months, would it took Netflix, seven years to achieve another status, you know, we’ve had 10 years of E commerce growth, in the first eight weeks of the COVID pandemic. I mean, we’re all folk, you know, forced, as things were shutting down. And, you know, that’s changed behavior that’s created an understanding of those approaches, which I think are going to be long lasting. So I mean, those are some trends, just you know, broadly across, you know, the industry or the economy. But I’d say a few other trends that I’d say relate more specifically to the RIA industry is, as I mentioned before, first we’re very bullish on the growth of the RIA model, the power of independence, the fiduciary standard, even with the best interest clause, there’s, there’s something special about what advisors do, we think, and investors will recognize that, I would also say a second trend for advisors is that, you know, we hear this from advisors is they’re not really experiencing price compression, what they’re experiencing is service expansion, clients are expecting more for the same price. And that’s a challenge or opportunity depend on how you view it. So we need to enable that and, and I think one of the key enablers is technology, technology is a great driver of efficiency and scale, it can, you know, eliminate the need for the routine to enable more time for what’s special in value add. So we see tech is that great enabler. And I think as you even mentioned, that the winning model, you know, for advisors is going to be the combination of people in technology, it’s not technology alone, it’s technology to help drive efficiency, and in some cases, growth and scale. But it’s people that well connected to that, that really creates the stickiness with clients, the trust, that’s so critical. So those are just some broad trends and trends within the adviser space, maybe just a little bit of data to sort of back that up, as you probably know, we do what we call our independent advisor, Outlook study, you know, twice a year, it’s the largest survey of its kind, we get over 1000 responses every time we do it, you know, we did a version of it last fall, and we just had a version that was just out. So I’m just gonna quickly refer to both the spring results aren’t out yet. So you’ll get a little preview on some of those. But, you know, last fall, when we did this, we’re clearly in the midst of COVID. Everyone weathering through that, and I would say the headline that came out of that survey is that, you know, COVID will have a long-lasting impact, you know, we are changing behaviors with advisors and within clients that are going to be long lasting. And so examples of that, you know, in the survey that advisors said roughly 60% said, they would have less need for office space. So you know, that’s a trend, that’s probably to be long lasting, know, roughly 50% said, we’re probably going to be in this continued remote work, we’ve now caught hybrid model, I think we’re all starting to see that with more companies coming out with their return to Office policies and, and the fact also that virtual interactions, I would say, are here to stay. No, roughly 40% of advisors back in the fall, were saying, you know, all this WebEx zoom, it’s probably gonna continue, I was forced to do it. Now, many of my clients who have had to teach them how to do a download. But now that they know how to do it, they realize they don’t necessarily have to come into the office every time. It’s just more convenient for them. It’s easier for their significant other spouse to sit with them at home to do a portfolio review, it’s probably not going to go away. So I think COVID has some long lasting impacts. And then the recent survey I’ll just briefly touch on. I think the headline from that is that technology now is a lead driver of innovation. COVID has definitely driven more innovation with advisors, roughly 60% are saying they’re seeing a level of innovation, they probably would not have seen absent COVID And when they look at sort of what’s really driving that innovation technology is the lead driver of that innovation. Now other drivers are the need for process You know, enhancements, some changes in client needs, but technology comes away as the core driver of what’s creating that growth and innovation, which is great to say. So with that backdrop, you know, you know, what do we see going forward? What you know, what do we think are the trends? There’s probably four I’ll just touch on. No one is digitization, we’ve got to stay focused on streamlining transactions, we’re still to paper based. We’re still an industry that drowns in Nago, not in good order, continuing to digitize more transactions, it’s clearly a focus here at Schwab, and will continue to be so and I really think COVID opened the door to that no more clients are willing to do an E authorization, maybe to use a DocuSign. It just sets us up for more digital interactions, which can reduce NIDA we’ve demonstrated that can enable straight through processing, a lot of goodness comes from that. Second, I would say is automation. Automation is really different than digitization, automated automation is making it so you don’t really have to do it. Now freeing up your time more. And I think there’s real opportunities in the investment management space. You know, we’ve seen that through some of our surveys, more and more advisors saying, Maybe I don’t really want to be that money manager, maybe I you know, I can I can automate more of that using tools like now with TDA with Irie bow on the monitor Market Center, and how do we expand some of those capabilities doing some of the things we’ve been doing in digital advice with Institutional Intelligent Portfolios. So we see a real opportunity for more automation, but particularly in the in the investment management space. Third, you know, I would be lacking if I didn’t say personalization, everyone talks about personalization, data enabled personalization, maybe the key area I’d focus on is personalized i
nvesting. We have a real focus at Schwab on things like direct indexing thematics. Now we’re in an era where you can personalize the product. You know, you don’t have to buy a standard index anymore, you know, you want to exclude certain things contrary to positions ESG. Skew, you’re able to do it. thematics great opportunity. And so we did an acquisition of motif last year. And so that’s a key area of focus for us as personalization in a variety of forms, but particularly around investment management. And last but not least, I would say, you know, integrations will continue to be key, I’d like to say it’s probably hard for any single provider to do everything. Well, we as a custodian Schwab, we know we can’t do everything, you know, that advisor needs integrations are key, and we want to enable choice. We know advisors, you know, no, two advisors probably going to want the same exact tech stack, they’re going to want to choose what’s right for them, we’ve got to play to that broad field. And no one has a stronger commitment to the FinTech ecosystem than Schwab in terms of the broad breadth of relationships we want to have and continue to grow. So those are, you know, it’s a long answer, Jack. So let me take a breath, see where you want to go?

Jack Sharry: Well, that we’ve had a number of folks on our podcast, I have to say that is the most thorough explanation of why Schwab is the industry leader. And as others have done explaining why they might be leaders, you’ve, you’ve out done them, I have to say so. Nice job. So I all my questions that I was gonna follow up with you answered. Clearly, you guys have figured out how to pull it all together. So my congratulations and admiration for that matter. So we’re gonna start to wind this conversation down. Now, maybe a quick summary, what are three things that you’d want to leave with our audience in terms of what they might benefit from or you might offer is in terms of what you’ve learned over these past many years and put up pulling all this stuff together?

Andrew Salesky: Yeah, I mean, yeah, the three key takeaway is me all stretch it to a fourth to is. The first I’d say is, you know, tech enables scale and efficiency, but it also enables growth and competitive edge. So, you know, advisors now they need to be active in the tech space. I know, it’s challenging. There’s a broad ecosystem out there. There’s a lot of options. You know, we’re here, we’re here to help. You know, we’ve got consultants and others that can help advisors navigate that, that ecosystem, but you know, technology is key, as we’ve discussed, you know, it’s not technology alone. I like to say, technology is necessary, but it’s not sufficient. It’s that combination of technology and people and that’s really what advisors embrace. That’s why we think it’s a winning model. But now I think it’s good for them to hear from you know, the leader of you know, Schwab’s digital, you know, advisor Tech, we know it’s about the people too, we really focus on how do we use our technology to bring the best out of the people and create the most room for where they can be truly value add. So that’s third, it your second and maybe third, I would say is, is just the importance of building and retaining trust is probably never been more important. I mean, we’ve all seen it lately. Just with vaccinations, I mean, I think many of us who have been fully vaccinated, I’m one of those are just bewildered by people not willing to take advantage of this isn’t the COVID threat so far worse than the fear of the vaccine yet, yet, it’s trust, you know, trust is so important. And, you know, trust with your money, nothing’s more important than trust. And we want to make sure that you know, what we’re doing with our technology, the availability, the security, that we put in place, how we enable the know those value-add interactions with people are always building trust, we recognize that. And so you may the fourth thing I’d add, and we talked about this, too, is just, you know, my confidence and excitement about the Schwab TDA integration in the in the value I think that’s going to bring, whether that’s security efficiency choice, you know, we’re really building an offering that we hope is right for the current generation of advisors, and hopefully right for the next generation of advisors, you know, as we evolved, so I think it’s, you know, a very bright opportunity for Schwab for the clients, you know, we’re able to serve and, you know, I look forward to seeing how things evolve.

Jack Sharry: Well, this has been terrific. I really enjoyed this conversation. I, as a student of Schwab, I thought I knew a lot, but I learned a lot more today. So I appreciate that. Before we say farewell for now, maybe if you could share something that’s interesting or unique you do outside of work, we do this with each of our guests. Things that you do that people may not know about you or would find interesting or surprising. So please tell us.

Andrew Salesky: Yeah, in this way. So yeah, Jack, this the hardest question, it comes back to me. The other way I’ll respond to this is, you know, it’s funny, my wife and I, we rarely talk about work. She She knows I’m doing this podcast, but doesn’t really know what it’s about. So I thought I’d share a story that sort of ties back to my wife so I can share back with her and the story is, last Friday, we celebrated 35 years since our first date, so I can remember it. Well, it was bowling it Fiesta lands in Palo Alto, probably the best bowling my wife and I ever did, because we’re both very competitive. I can’t say we’ve been regular bowler since. But 35 years since our first date, 30 year wedding anniversary this year, I guess I can connect that back to Schwab and 25 plus years at Schwab, as you probably say, I’m not a grass is greener type guy, I’m, you know, I kind of I would say I’m more of a stick with what I have and optimize it, you know, whether that’s the relationships, you know, where I work. So that’s, you know, the challenge I bring back to my team, we’ve got a great set of resources and opportunities ahead and my discipline towards continuing to optimize that for the benefit of our clients. So maybe that’s a good place to land.

Jack Sharry: That’s a wonderful story. And congratulations. It’s good to see loyalty still matters. And clearly you demonstrate that so I want to thanks. Thank you. Thank you, Andrew. This has been a wonderful conversation really enjoyed. It’s been a great deal of fun. For our listening audience. If you or you’ve enjoyed our podcast, please rate review and share what we’re doing here at well, tech on deck. We are available wherever you get your podcasts. So, Andrew, thank you. It’s been a great pleasure. I enjoyed it very much.

Andrew Salesky: Well, thank you, Jack. I enjoyed it as well. Thanks again for the invite.

Jack Sharry: Very good. Till we meet again.