July 25, 2005

Big Gain for Schwab's RIA Unit

McWhinney sees Schwab Institutional tripling by 2010

Fidelity Investments may be nipping at her heels and TD Waterhouse and Ameritrade are planning to bulk up their advisor businesses via a $3 billion merger. But Deborah McWhinney, CEO of Schwab Institutional, says she is confident that the advisor unit of the San Francisco-based discount broker will retain its No. 1 spot in the RIA custody business for the foreseeable future.

Although McWhinney admits in an interview that while "I'm paid to be paranoid," Schwab Institutional's latest figures give her reason for optimism. As of June 30, some 5,200 RIAs held $365 billion in custody with Schwab Institutional, a gain of nearly 18% over a year ago. The unit's number of new accounts, meanwhile, jumped 6% in the period. McWhinney predicts that by 2010, Schwab Institutional may nearly triple in size, to $1 trillion in assets.

McWhinney says the planned merger of Ameritrade and TD Waterhouse "will probably have some impact on the retail side, but I don't know about the institutional side--what platform will they use? You can't have two systems and get the cost savings." She adds that "our net new asset flow in Schwab Institutional this year may be more than what TD has under management." As for Fidelity Investments publicly stated goal of overtaking Charles Schwab & Co., McWhinney comments that "I am really not losing business to Fidelity. There's enough money out there for everybody, and when you're the strongest player you'll get a disproportionate share."

Asked whether Charles Schwab & Co. will remain independent in the face of merger rumors, McWhinney says "Chuck [Schwab] is adamant" about flying solo. Rather than sell out, she adds, Schwab plans to focus on growth. "He's a growth guy, with a capital G," she says.

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