After a lull in growth last year, RIA firms are now leaving wirehouses at a faster rate, said Charles Schwab chief executive Walt Bettinger in a call Friday with analysts discussing the company’s financial results, released earlier this week.
 
RIA firms brought in near-record net new assets of $49.5 billion in the first half, a 77 percent year-over-year increase. For the second quarter, RIAs affiliating with Schwab added $24.6 billion in net new assets, up 108 percent from a year ago.
 
A contributing factor “is the break away of more brokers of size,” Bettinger said.  “You’re starting to see some fairly large teams from a variety of different firms move to an independent model.”
 
The DOL fiduciary rule has contributed to that trend, Bettinger said, encouraging more broker teams to shift to a fee-based model where they are “then finding the path … to independence being a much easier hurdle.”
 
Including its retail business, Schwab gathered $46.2 billion in net new assets during the second quarter, a record for the period and the second-highest quarter ever. Year-to-date net new assets of $85.1 billion were also a record. (Those figures omit a $18.3 billion inflow from a mutual fund clearing client.)
 
Bettinger said the sizable second-quarter inflows were unusual for a period when many clients dip into their accounts to pay taxes. Net flows are a key metric for brokerage firms.

Schwab’s move last February to cut most transaction fees to $4.95 per trade from $8.95 has helped bring in new business. “We’re ensuring there aren’t barriers to prospective investors or investment advisors coming to Schwab,” Bettinger said.
 
Year-to-date new accounts were up 34 percent from a year ago, the most in 17 years.
 
Bettinger said Schwab also saw an 86 percent increase in net transfers into the company year over year. Total client assets reached a record $3.04 trillion as of June, up 16 percent from a year ago.
 
While lower fees have helped, there is a downside: Trading revenue in the second half fell 22 percent year over year, to $157 million. The decline in trading revenue was “entirely the result of our commission reductions,” said chief financial officer Peter Crawford.
 
Nevertheless, growth in other areas made up for the shortfall. Schwab generated $575 billion in net income in the second quarter, up 27 percent from a year ago.
 
Higher interest rates should help going forward, Schwab executives said. Last year, the firm had $55 million worth of money fund fee waivers forced on it by the Federal Reserve’s aggressive monetary policy. “I can confirm that as of the end of the quarter, those money fund fee waivers were completely gone, hopefully never to be seen again,” Crawford said. 
 
Bettinger added that retail investors at Schwab have turned more bullish as the market has gone up.
 
“By the end of the second quarter, cash levels have fallen to about 11.5% of assets overall,” he said. “That’s a level we’ve only seen one time since the market began its recovery” in 2009.