Schwab's RIA firms knocked 'em dead last quarter

Advisers who custody their assets with Schwab brought in a record $24.4 billion in last year's fourth qaurter

Jan 17, 2013 @ 4:14 pm

By Dan Jamieson

Advisers who hold their assets at The Charles Schwab Corp.'s custody unit brought in an eye-popping $24.4 billion in net new assets in the fourth quarter of last year — an all-time record.

The sizzling pace led to a record $47.8 billion in “core” net new assets for the company overall last year, spokesman Greg Gable said.

Schwab's “core” figure excludes unusual one-time assets flows. No one-time events influenced the net new assets coming from the RIA channel, Mr. Gable said.

About 80% of advisers' asset growth came from existing clients, said Bernie Clark, head of Schwab Advisor Services.

“It was from consolidation [of accounts] — advisers getting a higher share of the wallet,” he said.

Also driving flows were special dividends paid out by some companies in anticipation of higher tax rates, Mr. Clark added.

For all of 2012, Schwab Advisor Services garnered $56.4 billion in net new assets, up 26% from the $44.6 billion raised in 2011. The yearly total is still running behind the pre-crisis peak of $65.6 billion raised in 2007.

On the recruiting front, Schwab's custody operation landed 168 new RIA firms last year, with an average of just under $100 million in assets.

Mr. Clark declined to speculate on how many new advisers the firm would land this year, “but we've got a large funnel, equal to what we had last year,” he said.

The strong showing by Schwab's custody unit last quarter once again made it the largest Schwab business segment by assets. Schwab Advisor Services held $788.5 billion in assets for nearly 7,000 advisers as of the end of the year, slightly more than the $775.4 billion held by Schwab's individual investor business.

The last time the custody unit had more assets was in the second quarter of 2010.

While registered investment advisers at Schwab and TD Ameritrade Institutional historically have done better at asset gathering than the individual investor businesses at their custody partners, profit margins on the RIA side are slimmer due to lower trading volumes.

Schwab on Wednesday reported $4.88 billion in net revenue last year for the entire company, up 4% from $4.69 billion in 2011.

Net income was up 7% to $928 million, from $864 million.

An 11% increase in fees from proprietary money management helped offset declines in interest rates and “relatively muted investor trading activity,” chief financial officer Joe Martinetto said in a statement.

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