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Omar Aguilar, Schwab Asset Management

Industry Spotlight > Clearing and Custodial Firms

Schwab Eyes 20% Growth After $1.2T Milestone

By Emily Graffeo

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What You Need to Know

  • Schwab Asset Management exec Omar Aguilar cites the firm's distribution capabilities for his optimism.
  • He doesn't think mutual funds will become obsolete, as they will continue to be used in 401(k)s.
  • Aguilar is also looking to grow the model portfolio business.

Charles Schwab Corp.’s Omar Aguilar is eying a fresh spurt in asset growth — up to 20% a year — after its investment management arm surpassed a $1 trillion milestone on surging markets and voracious demand for cost-effective funds.

The chief investment officer of Schwab Asset Management credits the expansion to the parent company’s massive investor reach.

Schwab is the largest custodian to registered investment advisers, while 25 million retail investors use its brokerage platform.

Aguilar currently oversees $1.2 trillion in a suite of ETFs, mutual funds and separately managed accounts, after assets cleared the 13-digit hurdle at the end of 2023 as markets shook off recession fears in an everything rally.

He expects that number to grow by 15% to 20% annually for the next seven years.

“We have the luxury to have amazing distribution capabilities within our main company,” said Aguilar, who is based in San Francisco and has served as both the chief executive officer and CIO of Schwab Asset Management since 2022.

Distributing products to investors is often one of the most challenging parts of the ultra-competitive asset management world.

Smaller, independent fund issuers often need to see their products reach specific size thresholds before they are accepted onto trading platforms and wirehouses.

Schwab Asset Management’s position within a larger investment company gives it a somewhat “built-in” distribution network, where they can tap in to the millions of investors that use the parent company’s brokerage platform.

Schwab is the fifth-largest issuer of exchange-traded funds in the U.S., with its nearly $350 billion suite having more than doubled since 2019, according to Bloomberg Intelligence.

Aguilar is also looking to grow Schwab Asset Management’s model portfolio business over the next several years. He estimated that roughly $50 billion to $75 billion is invested in their models currently.

While Aguilar sees the firm’s ETF business growing, he doesn’t necessarily think the mutual fund wrapper will soon be obsolete. In retirement accounts — like 401(k)s — the technology supports mutual funds better than ETFs, he said.

“I still question whether or not the clients will end up benefiting from having an ETF within their retirement account,” he said. “On the other side, for the taxable accounts, there is going to be less need for a mutual fund and definitely the trend will favor ETFs.”

(Credit: Charles Schwab) 

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