SCHWAB IS BOOSTING INSTITITIONAL EFFORTS
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • BentallGreenOak agrees to acquire Metropolitan Real Estate Equity
      watch video
      0:45
      Private funds weathered 2020 turmoil
      Daniel McHugh
      Aviva Investors promotes from within for real assets CIO
      Marc Rowan
      More alts managers seek expansion to retail market
    • Kieran Mistry
      Hymans Robertson picks head for new non-traditional risk transfer unit
      Troy Saharic
      NEPC brings on director of new business development
      Bill Foley
      Foley-backed SPAC agrees to $7.3 billion deal with Alight
      Jason Schwarz, chief operating officer of Wilshire,
      New owners have big plans for future of Wilshire
    • OMERS CEO Blake Hutcheson
      OMERS records worst loss since 2008 on bad COVID-19 bets
      Mitchells & Butlers turns off tap on pension contributions until April
      Jerome Powell, chairman of the Federal Reserve, adjusts his glasses during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington on Sept 24, 2020.
      Powell says Fed will hold steady during economic recovery
      Institutional investors mobilize for equitable global COVID-19 response
    • Database’s debut focuses on public-sector DC plans
      DC plan sponsors differ on need for annuities – survey
      Biden’s retirement idea getting the cold shoulder
      Few participants tapped savings to weather pandemic – Vanguard
    • Emissions from a smokestack in Poland
      Asset managers facing more scrutiny on ESG issues – report
      Boris Johnson, U.K. prime minister, hosts the U.N. Security Council's virtual meeting on climate change risks in London on Feb. 23, 2021
      Progress in fighting climate change falls short – U.N.
      Justin Trudeau, Canada's prime minister, smiles during a virtual joint news conference with U.S. President Joe Biden in Ottawa on Feb. 23, 2021
      U.S. joins forces with Canada on climate change
      Signage is displayed at Harvard University Health Services in Cambridge, Mass., on April 20, 2020
      Harvard endowment’s fossil-fuel investments drop to 2% of assets
    • Donation illustration
      Jefferies will use trading commissions to do good
      Michael Arougheti
      SPACs ride wave as latest investment darling
      Spirit winners
      Prudential honors young people who are helping out
      2 U.K. pension execs take on ESG investing in new podcast
    • Robert 'Rob' Shafir listens during a Senate Permanent Subcommittee on Investigations hearing in Washington on Feb. 26, 2014
      Sculptor hedge fund hits sixth straight year of outflows
      The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the GameStop logo on a smartphone in an arranged photo.
      GameStop frenzy has hedge fund managers rethinking next moves
      Gabe Plotkin, chief investment officer and portfolio manager of Melvin Capital Management, speaks during the Sohn Investment Conference in New York on May 6, 2019
      Citadel, Point72 back Melvin with $2.75 billion after losses
      Shanghai skyline
      Global hedge funds struggle even in a more open China market
    • Illinois Teachers chalks up $1.3 billion in investments, commitments
      Emissions from a smokestack in Poland
      Asset managers facing more scrutiny on ESG issues – report
      Indiana chooses PIMCO for emerging markets debt
      Boris Johnson, U.K. prime minister, hosts the U.N. Security Council's virtual meeting on climate change risks in London on Feb. 23, 2021
      Progress in fighting climate change falls short – U.N.
    • Margaret Anadu
      GSAM chooses global head of sustainability and impact
      Signage for AMP Ltd. adorns the top of a building in the Docklands area of Melbourne on May 10, 2018
      Ares, AMP eye joint venture
      Thasunda Brown Duckett
      TIAA appoints Thasunda Duckett as president and CEO
      Brightwood Capital adds senior investment professional
    • Thomas Spencer
      Oklahoma Teachers chief Tom Spencer to retire
      Swedish flags fly from a tourist souvenir shop in Gamla Stan in Stockholm on March 26, 2020
      Sweden’s AP1 gains 9.7% in 2020
      CDPQ returns 7.7% in 2020
      Cleveland-Cliffs to pour $202 million into pension plans in 2021
    • Thomas Spencer
      Oklahoma Teachers chief Tom Spencer to retire
      Margaret Anadu
      GSAM chooses global head of sustainability and impact
      Doug Heron
      Lothian Pension Fund to lose CEO this year
      Correction: PGIM Real Estate
    • Carlyle secures $4.1 billion ESG-related credit facility
      Hamilton Lane raises $3.9 billion for fifth secondary fund
      PSG closes first Europe-focused fund at $1.5 billion
      Kohlberg closes latest private equity fund at $3.4 billion
    • Sebastiano Ferrante and Jocelyn de Verdelon
      PGIM Real Estate turns to staff to fill new roles
      European managers key in on specialist strategies
      Ingrid Jacobs
      Jones Lang LaSalle brings on head of diversity and inclusion
      EQT inks deal to buy real estate manager
    • Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
      P&I 1,000 largest retirement plans: 2021
      Retirement in emerging markets
      Outlook 2021
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Illinois Teachers chalks up $1.3 billion in investments, commitments
      Indiana chooses PIMCO for emerging markets debt
      New York Deferred Comp plan re-ups with Goldman as stable value manager
      Ann Arbor Employees taps Artisan Partners for international equities
    • Illinois Teachers chalks up $1.3 billion in investments, commitments
      Indiana chooses PIMCO for emerging markets debt
      New York Deferred Comp plan re-ups with Goldman as stable value manager
      Ann Arbor Employees taps Artisan Partners for international equities
    • Emerging Market Equity Manager Services
      Securitized Credit Manager Search
      Private Placements Asset Manager Search
      Actuarial Consultant Search
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Tesla cartoon
      Don’t confuse wealth creation with retirement saving
      Top 1000 cartoon
      Top 1,000 retirement plans weather storm just fine
      Infrastructure cartoon
      You must go big on infrastructure, Mr. President
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • Shifting DC Times – Winter 2021
      Bond ETFs show maturity during Covid market mayhem
      Pension Consolidation: Optimizing Scale and Maximizing Efficiency
      China is embarking on a new stage of growth
    • Sameer Shalaby
      Commentary: Why should investors care about treasury management?
      David Blitzstein
      Commentary: Without a national retirement policy, Americans face a future of pension crises
      Lawrence Cunningham
      Commentary: Gensler should keep Clayton’s pragmatic proxy adviser rules
      My-Linh Ngo
      Commentary: Pension funds and the role of the debt market in the fight against climate change
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      How will gold react?
      To people shaking hands
      P&I Content Solutions
      Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
      Sponsored Content By MassMutual
      Leveraging Data to Manage Risk
      Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      0:45
      Private funds weathered 2020 turmoil
      watch video
      0:59
      Secure choice and other retirement plans at a state level
      watch video
      3:33
      P&I 1,000 by the numbers 2021
      watch video
      1:33
      A look at hiring activity in 2020
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
    • POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
      POLL: The Biden administration’s economic plans
      POLL: Retirement issues in 2021
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • By the Numbers for February 2021
      Top Performing Managers of Managed Domestic Broad-Market Fixed Income, 4th Quarter 2020
      Top Performing Managers of Stable Value Fixed Income, 4th Quarter 2020
      Top Performing Managers of Convertibles, 4th Quarter 2020
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. Print
October 16, 1995 01:00 AM

SCHWAB IS BOOSTING INSTITITIONAL EFFORTS

Marlene Givant Star
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Charles Schwab & Co. is intensifying its efforts in the institutional market - both defined contribution plans and midsized money management firms.

    The firm, which recently acquired TrustMark, a 401(k) record-keeping software company, hopes to be among the top five service providers in the defined contribution market within five years. Sounds like a lofty goal for a firm that oversees $4 billion for such plans - not even placing it among the top 10 providers.

    As for establishing relationships with midsized institutional money managers, Schwab has begun marketing brokerage and custody as well as a new referral service to help firms attract private clients.

    Its primary 401(k) distribution channel, Schwab's network of third-party administrators, has brought in $4 billion in defined contribution client assets in two years.

    "We would like to accelerate it. It goes back to why we bought Trustmark. We must be a minimum of a top five player in the defined contribution business in five years," said John Philip Coghlan, executive vice president of Schwab Institutional, San Francisco. "If we double it every year for four or five years, we'll be fine. It's time for sharp elbows to come out, I think. It's a strategic imperative of the firm."

    Mr. Coghlan said Schwab's growth as a firm depends on the 401(k) market.

    "If you're not in that business, your retail business is imperiled. Individuals are putting a bigger piece of their personal savings in 401(k) plans." What's more, "scale will be more important to profitability as margins shrink. It's an extraordinary challenge to wrest those monies from competitors (such as market leader Fidelity) at the 401(k) stage. We need to get at the 401(k) assets before they are rolled over into IRAs."

    Why does Mr. Coghlan think Schwab will attain such an ambitious goal? It has brand recognition, expertise in educating investors and 210 branch locations in the United States that operate in an integrated fashion, he said.

    With such grand growth plans, Schwab is on a hiring binge. The likely targets: "top everything people" at big no-load mutual fund companies with demonstrated expertise in the defined contribution area. Such individuals would work in Schwab's headquarters doing management and marketing, product development or on a field sales force.

    "Our goals are very ambitious. We can't do that by recruiting college grads," Mr. Coghlan said.

    In the 401(k) market, "one of our main foci is the support of third-party administrators in the market. We could build it by allying with someone or using a service bureau."

    Mr. Coghlan said one place where Schwab has a definite gap is in the small plan market.

    "In the near term people are coming into Schwab every day and not finding an adequate solution," such as doctors wanting help in setting up a 401(k) plan.

    To better serve these small businesses in establishing 401(k)s, Schwab plans to use its network of fee-only financial planners.

    Schwab has 5,100 advisers with $41 billion in client assets, a rise of more than 40% from a year ago. Half of that money is invested in mutual funds; the rest is in stocks and bonds.

    Schwab also is helping larger firms target smaller private clients and 401(k) clients using its back-office capabilities and mutual fund offerings.

    "(These firms') little pieces of defined benefit plans are not growing. They have not figured out how to target 401(k) yet," Mr. Coghlan said.

    Among the firms forming relationships with Schwab are: Yanni*Bilkey Investment Consulting, Pittsburgh; Brundage, Story & Rose, New York; and Nelson Capital Management, Palo Alto, Calif.

    Yanni*Bilkey, one of the firms in Schwab's financial adviser network, has brought in $100 million in assets without any marketing. Clients with a minimum of $600,000 use Yanni*Bilkey for selection, asset allocation and monitoring of mutual fund investments.

    "It's been a great practice - 45 clients in four years," including a number of tax-exempt funds, said James Yanni, principal. "In the past we just turned all that business away."

    Nelson and Brundage recommend Schwab when clients ask for names of custodians. Nelson is also using Schwab's client referral service, which is being test-marketed on the West Coast. Brundage plans to come aboard when the service is expanded to the New York area.

    Mr. Coghlan said instead of limiting their business to individuals with $2 million to $4 million to invest, firms should take advantage of Schwab's back office to attract smaller clients.

    "There's not enough of those people being created. But people with $500,000 and up and 401(k) plan rollovers" are growing rapidly, he said.

    Firms can electronically interface with Schwab using the firm's Schwablink software package. They also can maintain account information at Schwab and update it daily, he said.

    "You can outsource and drop the costs of back office, enabling them to manage these accounts economically or use mutual funds through Schwab," said Mr. Coghlan.

    Nelson is doing that with the referral service.

    "The referral service is Schwab's response to wrap programs of big wirehouses. Schwab says 'we'll do what they do but a hell of a lot cheaper," said Brooks Nelson, president.

    In exchange for a referral, managers pay Schwab a fee of 75% of the first year's investment management fee, payable over three years. "It's a typical marketing incentive fee that a firm might pay its own in-house marketers," Mr. Nelson said.

    He said the clients, attracted through print and radio advertising and direct mailings, typically have $200,000 and up to invest and live near the office. It's not a big money-maker but it's worth it because "every 10th person who says they have $200,000 really has $1 million or more," Mr. Nelson said. "Some happen to turn into very good clients."

    The firm has hired assistant portfolio managers to handle small clients, devising mutual fund investment strategies on their behalf.

    Mr. Nelson said while his firm, which runs $275 million, is a small player in pension fund management, "to Schwab we're a big fish in a little pond. They're doing a great deal to pay attention to the details of having a relationship with an institutional manager."

    Don Daly, a partner with Brundage, Story & Rose, which runs $5 billion, agreed. "Schwab gives us more attention than other brokerage firms. Clients pay 10 cents a share for transactions vs. 40 cents to 80 cents a share from full-service firms. We now have over 200 accounts on the Schwab system," for trading and custody.

    Trading relationships are a priority for Schwab in the institutional market.

    Mr. Coghlan said midsized money managers don't necessarily qualify to trade on the institutional desk of a big wirehouse firm.

    Schwab is offering these firms "coverage trading" and a "prime broker" service, through which Schwab provides custody for the securities but the firm is still able to use research of other firms. "Instead of paying five to eight basis points for bank custody, they're paying zero at Schwab because they're trading through Schwab. It's built into the overall relationship pricing."

    Nelson uses Schwab for trading, as its prime broker.

    If the money manager insists on bank custody, Schwab can offer services through its subsidiary, the Charles Schwab Trust Co.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    How will gold react?
    Sponsored Content: How will gold react?
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Shifting DC Times - Winter 2021
    Bond ETFs show maturity during Covid market mayhem
    Pension Consolidation: Optimizing Scale and Maximizing Efficiency
    China is embarking on a new stage of growth
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    Gold Outlook 2021
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center