Charles Schwab’s gathered $43.4 billion in net new assets in the first quarter of 2013, a 9% annualized organic growth rate, and it opened 244,000 new brokerage accounts, up 2% year-over-year. But the growth rate in its advisory programs for retail investors, which compete with advisors, is much stronger.
According to a Schwab news release, client assets enrolled in advisory solutions totaled $135.9 billion at month-end March, including $15.6 billion managed in our Windhaven portfolios, up 15% and 51%, respectively, from a year ago. How good is that? Darn good!
With the Standard & Poor’s 500 index showing a total return of 13.9% in the 12 months ended March 31, 2013 and bonds, as measured by the S&P/BGCantor 7-10 Year U.S. Treasury Bond Index (TR), returned 6%. So a broadly diversified portfolio gained about 9% in 2012. So the increase in assets of 15% in Schwab’s retail advisory solutions represented about a 6% net increase in assets over the total return on a diversified portfolio. This happened in a period when investors were still showing net redemptions from stock mutual funds.
Schwab’s Windhaven Portfolios saw an astounding 51% increase in assets compared with the 9% return on a broadly diversified portfolio. Windhaven, which has a $100,000 minimum and charges 0.95% AUM on accounts of $500,000 or less, offers investors a choice of three broadly diversified index exchange-traded funds (ETFs) and “dynamically adjusts portfolio allocations, striving to capture growth in rising markets while attempting to reduce exposure in declining ones.”