The acquisition of Windward comes at a time when Schwab is ramping up the breadth of ETF strategies it offers advisors and retail clients. Bernie Clark, executive vice president for Charles Schwab Advisor Services, said in an interview that Windward uses 40 different asset classes packaged into three different categories: diversified conservative, diversified growth and diversified aggressive. "It's a strategy that performs well to the down side as well as the up side," Clark said.

He added that future acquisitions were a possibility. "We're looking for solutions for advisors--scalable open architecture answers for all our clients," Clark said. "We are going to buy sometimes [to accomplish that]."

Selig wonders if Schwab's purchase of an RIA like Windward signals a new trend among custodians, who "always seem to be in an arms race over something," he says. Selig notes that the Big Four custodians--Schwab, Fidelity, Pershing and TD Ameritrade--have been focused on beefing up their practice management areas and boosting their technology offerings.
"This might be an opening salvo for a new battleground of providing a specific type of asset management system that a custodian's client base can take advantage of," Selig says.
Windward's investment products will be offered through Schwab's advisor and retail platforms. Windward will no longer market investments directly to retail investors, according to Schwab. The deal is expected to close in the fourth quarter.

RIAs Say AUM Is Up; Revenue Still Off  '07 High
The strong rebound from the market lows of March 2009 has produced record-high AUM levels for RIAs, but higher costs mean revenue is still lagging, according to the latest Rydex|SGI AdvisorBenchmarking study.

The average advisory firm saw assets under management rise 28% last year, to $174 million from $136 million in 2008. That percentage increase is the highest in the survey's 11-year history. 

The survey of 427 RIA firms found 42% expect their AUM to grow another 11% to 20% during the next five years. It also found that 79% of advisors expect growth to come from referrals from existing clients.

That said, survey respondents said expenses were slightly more--and revenue slightly less--than peak levels from 2007. Last year's median profit margin of 19% equaled the prior year's, but that still trails levels from five years ago.

In addition, the survey found that 31% of advisors cut back on principal compensation in favor of investing that money back into their practice. At the same time, just 8% of advisors trimmed compensation for administrative and support staff.

The chief concerns cited by advisors were finding new clients (79%), too much government regulation (71%) and the need to boost technology investment (68%).

Advisors on average spent 10% of their time on client service last year versus 15% in 2008, and 22% are offering investment management services to other advisors.

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