SAN FRANCISCO -- Institutional money managers take heart. There finally might be a fairly simple way to tap the huge business of managing money for high-net-worth individuals.
Charles Schwab & Co. Inc., San Francisco, has joined the race to funnel hundreds of millions in assets from wealthy individuals to separate accounts managed by institutional investment managers. Its Schwab Institutional division is offering the 5,300 fee-based investment advisers who have custody client accounts with it access to separate account management of 34 institutional investment managers through Managed Account Connection. These advisers now steer $122 billion worth of individual client business to Schwab's mutual fund and brokerage products.
In this case, Schwab provides the "glue" between the money manager and the fee-based adviser in the form of record keeping and customer service, said Liz Fanlow, product manager of Management Account Connection. Schwab is setting up, she said, a marketplace of separate account managers similar to its successful mutual fund marketplace.
The new service is different from existing wrap fee programs, said Ms. Fanlow, because it does not offer brokerage advice about what manager to choose, just the connections. Advisers perform their own due diligence and style and performance analysis on the managers involved in the program or can seek advice from other investment professionals.
Fees -- from the money manager, from the investment adviser and from Schwab Institutional -- are fully disclosed to investors on their account statements. The minimum account size for each separate account varies by manager, but averages $250,000.
Managers included in the Managed Account Connection program pay a one-time fee to set up the technical and operational aspects of the program with Schwab. Ms. Fanlow would not disclose the fee, but said it was more than $10,000.
Schwab has based the list of separate account managers in the program on which firms the financial advisers said they wanted. More managers and asset classes will be added, according to demand from financial advisers, Ms. Fanlow said.
Some of the managers now participating in the program are Harris Bretall Sullivan & Smith Inc.; Loomis, Sayles & Co. LP; Van Deventer & Hoch; Stein Roe & Farnham Inc.; State Street Global Advisors; State Street Research & Management; 1838 Investment Advisors; Berger Associates Inc.; Fiduciary Management Associates; and Murray Johnstone International.
