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Why Schwab’s Asset Management and Administration Fees Fell


Jul. 20 2018, Updated 11:05 a.m. ET

Asset management and administration fees

Asset management and administration fees contributed $814 million, or 32.7%, of Charles Schwab’s (SCHW) net revenues in the second quarter. The line item saw a fall of 4% on a YoY basis because of a fall in revenues generated from money market funds. This revenue fall was a result of the company’s decision to reduce fees in the prior year, transfer funds into bank sweep accounts, as well as lower inflows in money market funds.

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In the second quarter, Charles Schwab recorded average client assets in the total mutual funds and ETF category of $886.1 billion, while in the same quarter of the prior year it was $802.9 billion. This YoY rise was fueled by the inflows in Schwab’s equity and bond funds and ETFs as well as in other third-party mutual funds and ETFs.

What could help brokers in the second half of 2018?

In the second half of 2018, investments in technology could help Charles Schwab expand its client base. Interactive Brokers Group (IBKR) has been planning to improve its trading platform in order to increase client retention. TD Ameritrade Holding (AMTD), another brokerage company (VFH), could benefit from its mobile platform moving forward. E*TRADE Financial (ETFC) could benefit from its acquisition of Trust Company of America in April 2018.

Charles Schwab garnered revenues of $458 million from mutual funds and ETFs, which represents 56.2% of the company’s total asset management and administration fees. Thus, higher inflows moving forward in mutual funds and ETFs could improve the company’s asset management and administration fees.

In the second quarter, Charles Schwab had average client assets of $287.9 billion in advice solutions, while in Q2 2017 this metric came in at $246.7 billion.


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