Schwab says breakaway broker trend has legs

 @ibtimes
on January 25 2010 4:16 PM

Charles Schwab Corp added a record number of wealth adviser teams as clients last year, benefiting from a wave of breakaway brokers leaving traditional firms to launch their own shops.

And while the biggest Wall Street firms contend the pace of departures has slowed, Schwab said on Monday that it saw signs that the migration trend has continued.

There's a tremendous amount of inquiry, Bernie Clark, head of the Schwab Adviser Services unit, told Reuters. The movement, if anything, is increasing.

Schwab, the largest online brokerage, is in talks with 300 to 400 adviser teams managing up to $30 billion in client assets about making the move to independence, he said.

Advisers are leaving firms of all sizes, not just the biggest brokerage houses.

The moves are distributed more now than it's ever been before, Clark said.

Charles Schwab said it had struck deals last year to provide custody, trading and other support services to 172 teams. The additions marked a 40 percent increase from 2008 and Schwab's fourth consecutive record growth year in this area.

Forging ties with independent advisers is big business for discount brokerages, which gain a significant source of new management fees and trading revenue.

Schwab said the new adviser teams had contributed $13 billion to the $41 billion of net new client assets reported by the adviser services unit last year.

Schwab currently holds $590 billion of assets in custody for advisers at independent firms.

Competition for advisers was fierce last year as thousands of brokers left the largest firms, like Bank of America Corp's Merrill Lynch and Morgan Stanley's Morgan Stanley Smith Barney joint venture amid mergers following the banking industry's near-collapse in 2008.

Schwab and its competitors that provide such support services for independent advisers were viewed as the biggest beneficiaries of the turmoil.

Last week, major brokerage firms said the rapid pace of departures had slowed by the end of 2009. Executives at Merrill and Morgan said attrition from the most productive brokers had fallen to negligible levels by the fourth quarter.

Schwab shares were up 1.3 percent at $19.06 in afternoon trading.

(Reporting by Joe Rauch in Charlotte and Joe Giannone in New York, editing by Matthew Lewis and Lisa Von Ahn)

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