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Wirehouse Exodus Fuels Discount Broker Expansion of RIA Services

December 15, 2017

Discount brokers such as Charles Schwab and TD Ameritrade Holdings are increasingly tailoring their offerings to serve independent RIAs, and the trend is likely to continue, the Wall Street Journal writes.

Schwab and TD Ameritrade have attracted around $200 billion in net new assets in 2017 — and most of that has been from independent financial advisors, the companies claim, according to the paper.

The trend of independent RIAs going over to discount brokers for custodian services is likely to continue as more brokers break away from the wirehouses, the Journal writes.

Cerulli Associates estimates that by 2020, indie advisors will manage more assets than all the major brokerages combined, including Merrill Lynch, Morgan Stanley and UBS, according to the paper.

The move toward discount brokers makes sense for clients, too: Matthew Celenza, who left Merrill Lynch’s private banking and investment group this summer to launch his independent practice Boulevard Family Wealth, tells the Journal his clients save 0.15% to 0.20% in annual fees now that he holds their assets at Schwab.

And it’s not just custodian services that the discount brokers offer, the paper writes. They now provide many of the services available at big brokerages, including technology, research and succession planning, and they do so at a lower cost, according to the Journal.

Walter Bettinger (Getty)

TD Ameritrade has boosted spending on professional services by 44% in the most recent quarter, while Schwab increased its spending by 16%, the paper writes. And they’re reaping the benefits already: the number of advisors joining from broker-dealers to Schwab has increased 35% from the year prior, CEO Walt Bettinger said in October, according to the Journal. At Ameritrade, meanwhile, new client assets that came from the advisor side were up 50% in October year-on-year, CEO Tim Hockey said, according to the paper.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here if you have a paid subscription.
  • To read the Wall Street Journal article cited in this story, click here if you have a paid subscription.