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With USAA and TD Ameritrade deals pending, Schwab also resumes its SMA roll-up after eight-year hiatus with Wasmer, Schroeder deal

The San Francisco broker is purchasing a $10.5 billion bond manager after buying Windhaven in 2010 and ThomasPartners in 2012

Wednesday, February 26, 2020 – 2:50 AM by Brooke Southall
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Rick Wurster: 'Generating income is one of the greatest financial needs'

The Charles Schwab Corp. is back on the asset manager roll-up train with the purchase of Wasmer, Schroeder & Co., after taking the last eight years to digest ThomasPartners and Windhaven.

Scott MacKillop
Scott MacKillop: 'Maybe it’s the first brick in a very long-term plan, or maybe just a one-off?'

The San Francisco brokerage added the manager of fixed-income SMAs with a $10.5 billion cash deal as an addon to the $2 trillion Schwab Asset Management Solutions group and to the proprietary SMA family which has $90 billion of AUM.

The deal closes a gap in inventory on the Schwab asset management shelf -- especially now that boomers are retiring.

“Generating income is one of the greatest financial needs facing the growing number of investors who are in, or preparing for, retirement,” said Rick Wurster, executive vice president, Schwab Asset Management Solutions, in a release.

Wurster previously served as the CEO of Charles Schwab Investment Advisory (CSIA). Before that, he headed ThomasPartners Investment Management and Windhaven Investment Management. Those entities later merged into CSIA to create one blended RIA.

Still, the deal surprised observers who wondered what prompted the move -- particularly with the TD Ameritrade and USAA purchases filling Schwab's deal plate.

"Maybe it’s the first brick in a very long-term plan, or maybe just a one-off?  Hard to tell," says Scott MacKillop, CEO of First Ascent Asset Management of Denver, Colo.. "Why they are doing this deal now is also a bit of a head-scratcher.  You’d think their plate would be pretty full."

Strategic fit

Schwab did not respond to an RIABiz request for an interview, nor did it speak with any publication about the deal.

That said, Schwab offered a vague rationale in the release. 

"The acquisition enables the growth of Schwab’s fixed income separately managed account business with an opportunity for increased asset flows," the release states.

The latter fits with the strategy laid out in 2010 when Schwab bought then $2-billion in assets Windhaven and $2.3-billion AUM ThomasPartners. Namely, the idea entails buying a solid, but little-known SMA manager, then using Schwab's massive retail and RIA distribution to pump up assets. And it worked for a while. See: Schwab's purchase of Windhaven made its asset growth soar -- and RIA assets may be the afterburners

Windhaven's assets soared to nearly $20 billion before crashing back to about $11 billion by 2016. It's now about $7.7 billion. See: As Schwab non-compete expires, Steve Cucchiaro jumps back into the ETF management game with old staff 

ThomasPartners swelled more than six-fold in assets to more than $13 billion as of January a year ago. 

Wasmer, Schroeder's registered funds charge 50 basis points -- a hefty amount in this day-and-age of compressed margins.

"The fees are on the plump side—another fact that makes this move seem like it goes against all the trends," MacKillop adds.

Schwab paid $150 million for Windhaven at closing and perhaps another $100 million later. It did not disclose how much it paid for Wasmer.


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