What a difference three months can make. Summer market volatility took its toll on Charles Schwab Corp.’s third-quarter results, with sharply higher trading revenue being offset by flat asset management fees. Schwab today said its trading revenue for the third quarter rose by 36 percent year over year (21 percent sequentially), to $248 million, while asset management fees were flat, at $466 million. By comparison, in the second quarter it was asset-related fees that were up a healthy 15 percent year over year, while trading revenue fell by 12 percent.

Trading revenue accounts for only about 20 percent of Schwab’s overall revenue, so an uptick in that category doesn’t help as much as an increase would in the assets column. And custodians like Schwab prefer growth in asset management revenue, a segment that’s less volatile than trading. (How volatile was the quarter? Schwab saw a record 1,005,000 trades in a single day in August; daily average revenue trades in the third quarter were 323,100, up from 264,900 in the second quarter.)

Schwab reported net income of $220 million, or 18 cents a share, on net revenue of $1.18 billion. Analysts polled by ThomsonReuters were expecting 19 cents a share in EPS. It was a modest shortfall, yet investors still slammed the stock, pushing its price down by 5.4 percent just after 3 p.m. to $12.06.

Analyst Michael Wong, who follows Schwab for Morningstar, says some investors may still see the company primarily as a retail brokerage despite the relatively low share of revenues that trading accounts for. “People who were expecting a spike in earnings just because of trading revenue may have been disappointed,” he said. “Charles Schwab has taken a massive shift in strategy over the last decade or so, going from a discount brokerage to, much more increasingly, a mass affluent wealth services provider.”

Investors put the brakes on risk, judging from asset flows. Cash equivalent deposits were up 17 percent year over year, while Schwab’s proprietary equity and bond funds were down 20 percent year over year and 31 percent sequentially. The size of the sequential drop surprised Wong; “It was just so much worse than any of the other fund categories,” he said. “It’s definitely a big red question mark for me at the moment.” Schwab doesn’t hold earnings report conference calls, but it will discuss its results during its quarterly business update on Oct. 26.

Despite the pullback, Wong wrote in his Morningstar note on the results, he didn’t find “significant signs of investor disengagement in the numbers. We continue to see tremendous upside and long-term value in Charles Schwab’s shares. … Asset management and net interest income will likely remain lackluster for a couple of years, but we expect rising interest rates in 2013 or 2014 will spur several years of double-digit revenue and earnings growth.”

In the company’s release on the earnings results, Schwab President and Chief Executive Walt Bettinger said, “Although the environment weakened further during the third quarter, our clients stayed with their long-term investing plans. Their cash holdings at Schwab remained close to pre-crisis levels and they were consistently net purchasers of securities.”

Schwab Advisor Services added 84 teams in the first half of 2011, bringing net new assets of $5.8 billion with an average team size of $57 million. Total assets under custody at Schwab Advisor Services at mid-year was $697 billion. The growth continued through the third quarter; by Sept. 30 net new assets remained positive at $10.6 billion–flat sequentially, but up 33 percent year over year. Companywide assets totaled $1.58 trillion, up 7 percent.

TD Ameritrade’s earnings report comes out on Oct. 25. Fidelity Investments is privately held and doesn’t release earnings.

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