Schwab's custody business for independent advisors took in $120.1 billion in net new assets in the third quarter, up 47% from a year earlier, even as the firm throttled a tax strategy that had garnered signficant interest among RIAs.
Schwab released the figures Thursday alongside as it disclosed record quarterly revenue of $7.2 billion, which were up 17% year over year.
Schwab Advisor Services ended September with $5.85 trillion in client assets, up 17% from a year earlier and nearly 44% of the firm’s $13.33 trillion total. The advisor unit brought in more new money than Schwab’s retail arm, Investor Services, which added $72.3 billion.
During the firm's earnings call on Thursday, CEO Rick Wurster told analysts that Schwab serves more than 16,000 RIAs, with 1,101 advisory firms adding it as a custodian in 2025 as verified in Form ADV filings. Its next four competitors, unnamed in the earnings presentation, added between 79 and 349 firms each, according to Schwab.
“We offer so much more than just long-short, which is why we are the preferred custodian for most RIAs in the industry,” Wurster said.
Breaking down the new business, RIAs with more than $5 billion on Schwab’s platform accounted for 36% of institutional Advisor Services net new assets in the quarter. Firms with $1 billion to $5 billion contributed 22%, those with $100 million to $1 billion supplied 30%, and practices with less than $100 million made up 13%.
Tax-aware long-short strategies, which pair long and short stock positions to generate losses that can offset capital gains, remained a large and growing chunk of Schwab’s balance sheet. Of the $187.9 billion in client margin loans outstanding at the end of September, $60.7 billion was tied to long-short strategies used by RIAs.
Average margin loans linked to the strategies amounted to $51.4 billion in the quarter, compared with $2.8 billion a year earlier. Schwab cited the strategies as one reason net interest revenue rose 14%.
Earlier this year, Schwab introduced limits on the portion of an RIA's assets that could be allocated to long-short accounts. Last month, Schwab raised the minimum for its tax-aware long-short accounts to $10 million from $1 million.
Wurster said the program grew faster than Schwab expected it would because a large competitor had less capacity to support it.
“It was important to us to throttle growth for a period of time to make sure that we can support this from an operational standpoint, from a capacity standpoint,” he said, adding that since the mid-September change, Schwab hasn’t seen “any signs of deceleration in our Advisor Services NNA.”
Read more: Custodians curb long-short SMA strategies
Schwab also laid out its strategy on how it will let AI tools reach client accounts. “For our RIA clients, we have collaborated with Anthropic and are proud to be the first RIA custodian included in Claude for Financial Advisors,” Wurster said.
That arrangement, announced last month as part of Anthropic’s launch of an AI suite for RIAs, lets advisors reach Schwab Advisor Center from Claude through an authenticated connection. Wurster cited it as one example of a wider plan to let clients connect their own AI models to Schwab’s servers.
He said Schwab is also taking the same approach with retail traders because it can secure authentication and limit access to the highest-risk actions, such as moving money.
AI agents that try to log in on a client’s behalf without authorization will get different treatment. “It is not a safe way for our clients to access Schwab, and we are blocking it to protect clients and our firm,” Wurster said.
On the retail side, Schwab introduced Charley, an AI assistant that gives US retail clients conversational access to the firm’s tools and insights. That capability will be expanded to reach all clients in the coming months, according to Wurster.
"For our retail clients, Charley combines best-of-third-party LLMs with Schwab's trusted data and security," Wurster said.
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