Charles Schwab’s added $13 billion of assets from former full-service brokers who set up or joined registered investment adviser firms in 2008, up 41% from the previous year.
The breakaway broker gains represent about 22% of the $60 billion of new assets that all independent advisers brought to Charles Schwab & Co. Inc. last year, according to Bernie Clark, senior vice president and head of sales for the firm’s adviser services business. The assets came from 123 teams of brokers who set up as independent registered investment advisers or who joined existing RIA businesses.
In 2007, San Francisco-based Schwab attracted $9.2 billion from 114 teams of breakaway brokers.
The average size of client assets managed by new RIAs at Schwab doubled to almost $120 million in the past year, he said.
However, a good chunk of the new business came from one client — Gurtin Fixed Income Management LLC of San Diego and Chicago — which set up shop last February with about $5 billion of client assets and uses Schwab as its primary custodian.
William Gurtin, who had been with Morgan Stanley and earlier worked at Merrill Lynch & Co. Inc. and The Goldman Sachs Group Inc., was featured on a panel on the future of fixed income at Schwab’s annual Impact conference for independent advisers in September. Morgan, Merrill and Goldman Sachs are all based in New York.
Mr. Clark said that about one-third of the assets that Schwab has attracted in recent years came from broker teams that used to work at Morgan Stanley and Citigroup’s Smith Barney.
Morgan Stanley and Smith Barney earlier this month announced plans for a retail brokerage joint venture that will be controlled by Morgan Stanley, and have not yet announced retention packages for their financial advisers.
Alexander Samuelson, a Smith Barney spokesman, declined to comment on Mr. Clark’s remark, but said custodians are exaggerating the phenomenon of the breakaway broker and the quality of the brokers who choose to set up their own businesses.
The competition for top brokers continues among big brokerage firms, which are offering lucrative sign-on bonuses and retention packages, he and others said.
“The idea that top-performing advisers are going independent is somewhat of an overblown legend,” Mr. Samuelson said.
“Many advisers, upon doing their due diligence, realize how much work it takes to run a business with all the legal and regulatory issues involved. Especially today, they are finding that it takes too much time away from their core business of working with clients.”
The number of financial advisers and private bankers at Citigroup and Smith Barney fell 11% at the end of 2008 to 13,765, from 15,454 one year earlier.
A Morgan Stanley spokesman did not return calls for comment.
For the full report, see the Jan. 26 issue of InvestmentNews
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