The market share gains enjoyed by the independent RIA channel continue.
Latest earnings reports issued this week show that the Charles Schwab Corp.’s RIA custody unit—the largest custodian and a fair proxy for the industry—continues to gain assets at a faster pace than its wirehouse competitors.
Schwab’s Advisor Services unit pulled in $24.9 billion in net new assets in the first quarter, up 15 percent from a year ago. RIA-managed assets at Schwab totaled $1.36 trillion, also up 15 percent.
Including its retail investor business, total assets at Schwab reached $2.92 trillion as of March, up 14 percent year over year. Total net new assets in the quarter were $38.9 billion, up 22 percent.
By comparison, the S&P 500 total-return index was up 16.9 percent over the period. Investor assets at brokerage firms include a mix of stocks, bonds, cash and funds, so they don’t track the equity market directly.
The wirehouses experienced slower growth in assets overall. How much of the growth at the big wires was market-related is unknown—none of them disclose net new assets.
Nevertheless, total assets at Wells Fargo’s wealth and investment management unit, which includes Wells Fargo Advisors, grew 9 percent from a year ago, to $1.8 trillion. Morgan Stanley saw the same growth rate, reaching $2.19 trillion in client assets.
Merrill Lynch and U.S. Trust, both part of Bank of America’s wealth management business, grew total assets (including loans and leases) by 4.8 percent, to $2.59 trillion.
The latest results track the longer-term trend of relatively slow asset growth at the traditional firms.
From 2010 to 2015, assets grew at a compounded annual rate of 4.9 percent in the wirehouse channel, about half the 9.9 percent among independent RIAs, according to researcher Cerulli Associates.
But the good news for wirehouses is the continued shift toward managed assets, which is helping financial results.
Bank of America executives told analysts Tuesday that the wealth management business gained $29 billion in fee-paying assets in the first quarter, partly due to a shift of IRA brokerage assets to managed accounts.
“We had significant growth in AUM, which offset [the] continuing decline in brokerage,” said chief financial officer Paul Donofrio. Asset-based fees were up about 8 percent in the quarter, he said.
At Wells Fargo, “advisory assets” were up 14 percent from a year ago, to $490 billion.
And at Morgan Stanley, asset-based fee revenues grew nearly 5 percent, to $2.2 billion from $2.1 billion a year ago, due to appreciation and positive fee-based asset flows of $18.8 billion, according to the firm.
Morgan Stanley’s wealth management unit reported a pre-tax profit of $973 million, up 24 percent compared with $786 million in the first quarter of last year. Wells Fargo’s wealth and investment management business earned $623 million in the first quarter, up 22 percent from a year ago, according to chief financial officer John Shrewsberry. And earnings at Merrill/U.S. Trust grew 4 percent to $770 million, with a record profit margin of 27 percent.
Schwab is also solidly onboard the fee-based bandwagon. At the end of March, $1.48 trillion in assets were enrolled in some form of ongoing advisory service, an increase of $200 billion from a year ago, according to a statement from chief executive Walt Bettinger. The company earned a record $564 million in the first quarter, up 8 percent year over year.