Schwab broadens managed acct distribution

FWR Staff

5 October 2005

Discount pioneer repeats “Main St. v. Wall St.” mantra. Charles Schwab & Co. has just made separately managed accounts (SMAs) available to all its qualified retail brokerage clients – at far lower prices, it says, than its wirehouse competitors.

“Our managed account pricing is as much as 50% below the published rates of major competitors,” Schwab’s retail brokerage head William Atwell says in a press release. That, he adds, continues Schwab’s “heritage of giving Main Street investors affordable access to the investing opportunities previously only available from Wall Street at high prices” – an apparent reference to Schwab’s post-“May Day” role as a pioneer of discount brokerage in the 1970s.

Up till now access to Schwab’s SMA platforms has been exclusively through Schwab Private Client and registered investment advisors (RIAs) who work with Schwab Institutional.

Particulars

Schwab is giving retail clients access to two of its SMA platforms. “Managed Account Select” features a roster of about 40 third-party managers, researched and reviewed by investment consultant Callan Associates. “Managed Account Affiliates” features five investment strategies from Schwab affiliate U.S. Trust, including a tax-efficient index strategy, and five from Charles Schwab Investment Management, based on Schwab Equity Ratings research.

Minimum investments for Schwab’s retail SMAs are $100,000 for most equity strategies and $250,000 for most fixed-income strategies.

With $24 billion in assets at the end of August 2005, Schwab was one of the 10 biggest SMA distributors. Though it trails industry-leading SMA sponsors like Smith Barney and Merrill Lynch – each of whose SMA assets easily surpass the $100-billion mark – Schwab says it’s program is growing fast, having posted a 39% increase in assets in the past 12 months or so.

Schwab has offered SMAs to RIAs who work with Schwab Institutional since 1998. Schwab Private Client introduced them to high-end retail investors in 2001. RIAs distribute about 80% of Schwab’s SMAs.

Schwab does not offer multiple-discipline accounts or unified managed accounts. –FWR