Aimed at advisors moving from brokerages to independence. Schwab Institutional has a new separately managed account (SMA) platform for independent fee-based investment advisors. “Managed Account Access” is meant to give advisors entrée to popular SMA managers across an array of strategies while saving them the trouble of negotiating contracts, fees and account minimums with the managers they choose.

Pre-negotiated account minimums for Managed Account Access SMAs are $100,000 for most equity strategies and $250,000 for fixed income. Fees start at around 1% and include money-manager services and Schwab's custody and brokerage services.

Transition platform

“This new offering can provide advisors who are comfortable doing their own manager research with access to a broad array of managers and styles [along] with the smoother administrative backbone provided by a bundled program,” John Morris, head of Schwab’s managed account business, says in a press release.

In that sense, Managed Account Access is a good fit for former brokers who are comfortable conducting their own SMA research and want access to a broad swathe of strategies from well-known managers at low minimums, but also “want to work with pre-negotiated contracts” as they were accustomed to doing while working on brokerage platforms, says Schwab spokeswoman Lindsay Tiles. Morris describes the new platform as “a soft landing place for the brokers transitioning their clients [that] takes the pain out of the dual-contract process for both the advisor and the money manager.”

Managed Account Access joins two pre-existing Schwab SMA platforms. “Managed Account Select” is another bundled offering that features an approved roster of managers, researched and reviewed by Callan Associates, an Oak Brook, Ill.-based investment consultancy. “Managed Account Marketplace” is an open-architecture, dual-contract platform with access to hundreds of participating managers.

More to come

The new platform incorporates Schwab’s “Managed Account Affiliates,” which features five investment strategies from Schwab affiliate U.S. Trust, including a tax-efficient index strategy. For now, Managed Account Access features nine managers and 22 strategies. Next month Schwab expects to make it 24 strategies with additions from Charles Schwab Investment Management, based on Schwab Equity Ratings research. Schwab says it’s in talks to get more outside managers aboard by the end of this year.

San Francisco-based Schwab says it has “one of the largest and most comprehensive” SMA distribution programs for independent investment advisors.” Cerulli Associates, a Boston-based research firm, pegs it as sixth largest in the industry overall with $18.5 billion in assets at the end of March 2005. Although it trails industry-leading SMA sponsors like Smith Barney and Merrill Lynch – each of whose SMA assets exceeded $100 billion at the end of March – Schwab says its SMA program is growing rapidly, increasing 25% over the past 12 months. That includes $1.7 billion in new assets in the first half of 2005.

Schwab Institutional provides custodial, operational and trading support to over 5,000 independent advisors. In 2004 it took in about half of Schwab’s $50.3 billion in net new money. –FWR

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