Charles Schwab & Co.-the king of do-it-yourself investing-is cashing in on the popularity of fee-based investment advisers.
The San Francisco-based brokerage giant steered more than $350 million of assets under management to independent advisers during the first five months of the year.
Under a program dubbed AdvisorSource, Schwab's 250 branches refer customers to local investment advisers who pay the brokerage an undisclosed annual fee. Some 400 independent advisers participate in the program, which was rolled out nationwide in March.
"On the retail side, a disproportionate amount of the accounts we lost were high-balance customers," said Linnet F. Deily, executive vice president of Schwab Institutional Services. "There was a feeling that they needed more than what we were offering."
AdvisorSource was initially designed as an 800-number that Schwab customers could call when they wanted a referral to an investment adviser. But according to Ms. Deily, that service, launched in 1995, proved too impersonal.
Now, when prospective or current Schwab customers with at least $100,000 to invest visit a Schwab branch, they are asked if they have ever considered meeting with an adviser. If they say they are interested, Schwab provides a free referral, based on the investors' goals, philosophy, aversion to risk, and other criteria.
Another 200 to 250 investment advisers are expected to join AdvisorSource over the next few years, Ms. Deily said. To qualify, advisers must have a three-year track record and manage at least $25 million.
Ms. Deily, the former chairwoman, president, and chief executive officer at First Interstate Bank of Texas, joined Schwab Institutional last October. As general manager for investor services, she oversees trading, custodial, and support services for the 4,900 fee-based advisers served by Schwab Institutional.
Collectively, they manage $78 billion of assets, of which AdvisorSource represents $800 million.
Ms. Deily said Schwab is planning to take a more active role in helping fee-based advisers fight increasing competition from commission-based brokers, who are increasingly positioning themselves as financial planners and investment managers.
"The commission firms take ads in the Sunday papers where they talk about their financial advisory services," Ms. Deily said. To help its clients cope, Schwab is considering running its own ads this fall to support the fee-based business.
"The advisers want us to take a strategic leadership role in the industry," she said.
