Advisors gain access to portfolios from Envestnet, FundQuest, Morningstar. Schwab has expanded its separately managed account (SMA) platform for RIAs through new and enhanced relationships with four third-party investment-management providers. The idea is to provide a broader array of products and services to advisors who have decided to outsource investment management as a way to streamline business processes and spend more face time with clients.

"More advisors today are looking for turnkey solutions that provide research capabilities, sales support and back-office administration, allowing them to focus on serving clients and growing their businesses," says Barnaby Grist, head of business development for Schwab Institutional. "We see this trend occurring among established and fast-growing RIA firms [and] among newly independent advisors who have left established firms and are setting up shop on their own."

Command performances

Schwab has been building out its SMA platform, slowly and steadily, for the past four or five years. By mid-year 2007, it had become one of the five biggest SMA distribution platforms in the industry, according to Cerulli Associates, a Boston-based market-research firm.

Schwab's expanded SMA platform includes several unified managed account (UMA) offerings. UMAs are single-account products that blend manager-model SMAs, mutual funds and ETFs. Until recently, Schwab's only multi-sleeve account were a multiple-discipline (MDA) based on models provided by Legg Mason's ClearBridge asset-management business and -- in a relatively new development -- MDAs from affiliates of Chicago-based Nuveen and Seattle-based Parametric.

The new platform now includes

An expanded relationship with Chicago-based Envestnet Asset Management (which previously provided SMAs and mutual-fund wraps) to include UMAs.
A brand-new relationship with Boston-based FundQuest to provide SMAs, mutual-fund wraps and ETFs, separately or in MDA or UMA bundles.
New new tie-in with Chicago-based Morningstar Investment Services to offer actively managed mutual fund, stock and ETF portfolios.

Schwab refers to these providers as "tamps," or turnkey asset management providers -- probably to distinguish their offerings from its own non-proprietary offerings.

These providers also provide back-office services, including client profiling, proposal generation, investment management, portfolio construction, manager research, rebalancing, performance monitoring, reconciliation, reporting and operations.

The new additions bring the number of third-party providers on Schwab's turnkey platform to 18, including Oak Brook, Ill.-based Callan Associates, St. Louis, Mo.-based BAM Advisor Services and Rockville, Md.-based Fortigent.

Besides building out its tamp offerings, Schwab has build out its bundled, pre-negotiated-fee SMA offerings to include access to more than 230 investment strategies from more than 75 money managers.

In addition, Schwab's Managed Account Marketplace provides advisors who want to do their own due diligence and negotiate their own fees with access to 865 managers and 2,440 different investment styles.

The changes to Schwab's platform are a reflection of advisor demand for "sophistication, simplicity and flexibility" in outsourced investment products, according to Jeff Carlin, head of Schwab's SMA business. "As advisors' clients' financial needs become increasingly complex, we are seeing more demand for solutions that provide diversification and access to institutional-quality money management."

You can find out more about Schwab's outsourced third-party platform here.

Schwab Institutional is the RIA custody unit of San Francisco-based Schwab. At the end of 2007, it custodied $583 billion in client assets for about 5,500 independent advisories. -FWR

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