Charles Schwab is a fee-based financial advisor firm that offers a number of services, including investment management, financial planning and a robo-advisor. With many employed advisors and billions in assets under management (AUM), Schwab easily ranks among the largest financial services companies in the U.S. The firm also has a banking arm.
As a fee-based firm, certain advisors are compensated for the sale of Charles Schwab mutual funds and exchange-traded funds (ETFs). These advisors have a financial incentive to recommend these funds over others that may be more appropriate or cost-effective for advisory clients. While this is a conflict of interest, the firm has a fiduciary duty to act in its clients' best interests.
Charles Schwab Background
Charles Schwab was founded in 1971. Today, the business is a wholly owned subsidiary of The Charles Schwab Corporation (CSC), which is publicly traded on the New York Stock Exchange. The firm has branches across the U.S. in every state.
Charles Schwab Client Types and Minimum Account Sizes
Of Charles Schwab’s nearly hundreds of thousands of client accounts, most belong to either non-high-net-worth individuals or high-net-worth individuals. Businesses are another major client of Schwab, along with trusts and estates. Institutional clients include banks, investment companies, investment funds, retirement plans, charitable organizations, government entities and insurance companies.
Charles Schwab does not institute a singular minimum account size. Instead, the firm has varied requirements for different services. However, Schwab Private Client has no minimum.
Services Offered by Charles Schwab
Charles Schwab provides a comprehensive suite of financial services, including investment advisory, brokerage, financial planning, and wealth management. Clients have access to a wide range of investment products, such as stocks, bonds, mutual funds, ETFs, options and alternative investments.
Schwab’s services cater to both self-directed investors and those seeking personalized advice. Their Schwab Intelligent Portfolios offers automated, goal-oriented investment management, while their Schwab Managed Portfolios and Schwab Wealth Advisory programs provide more tailored, actively managed solutions.
Schwab also supports retirement planning with products and services like IRAs, 401(k) plans and annuities. They emphasize tax efficiency through services like tax-loss harvesting in certain managed accounts. Additionally, Schwab provides financial planning tools for budgeting, goal tracking and managing assets.
For institutional clients, Schwab offers custodial services, portfolio management, and administrative support. Their platform integrates real-time market data, research tools, and educational resources for investors seeking a hands-on approach.
Clients can benefit from access to professional advisors, depending on their needs, and a broad range of portfolio strategies that can be customized for varying risk tolerances, time horizons and financial goals.
Charles Schwab Investment Philosophy
Because Charles Schwab offers such an expansive array of services and has a wide network of advisors and partnered independent advisory firms, the company doesn’t necessarily abide by a singular investment philosophy. With that being said, Charles Schwab’s approach to investing client assets may involve both strategic and tactical asset allocation, using a range of investment products like mutual funds and ETFs.
Their portfolios are diversified across asset classes, including domestic and international equities, fixed income and liquid alternatives. Schwab emphasizes low-cost, index-based investing with portfolios designed to match a client’s risk tolerance.
For more active investors, tactical strategies are offered, allowing for short-term adjustments based on market conditions. Portfolios are automatically monitored and rebalanced to maintain the target asset allocations over time
Fees Under Charles Schwab
Charles Schwab charges fees based on the services provided and the types of accounts clients hold. Key fees include:
Pooled Investment Vehicles: Schwab provides advisory and administrative services to registered mutual funds and ETFs, charging a fee based on a percentage of the fund's average daily net assets, detailed in the fund’s prospectus.
Model Portfolios: Schwab charges a fee for certain model portfolios, such as ThomasPartners and Wasmer Schroeder Strategies, based on the percentage of assets managed. They may also earn fees from third-party mutual funds and ETFs included in portfolios.
Managed Accounts: For Schwab Managed Accounts, clients pay a single "wrap fee" that covers advisory, brokerage, and custodial services. This fee is usually based on assets managed and varies depending on the program.
Additional Costs: Clients may also incur fees such as transaction costs, mutual fund expenses and account maintenance fees. Schwab waives trading commissions in some managed accounts but does not cover other third-party broker or custodial fees.
What to Watch Out For
Despite being a massive firm, Charles Schwab only has one disclosure on its Form ADV, which is filed with the Securities and Exchange Commission. The disclosure is of a civil/administrative penalty the company faced in Norway in 2021.
Opening an Account With Charles Schwab
If you want to work with Charles Schwab, it may be worthwhile to stop by one of its nearby offices. The firm offers a “Find a Branch” tool on its website that will allow you to view every Schwab location in the country or locate the office closest to you. Another option is to call the firm at (877) 519-1403 or open an online chat with a Schwab representative.
All information is accurate as of the writing of this article.
Tips to Improve Your Investment Game
- Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- One way to optimize portfolio performance is to align your risk tolerance and other investment considerations with your specific asset allocation. In other words, if you’re willing to accept high risk and volatility, you may include more stocks in your portfolio. On the other hand, a risk-averse investor would likely stay away from all but a few stocks and choose instead to focus on bonds and fixed-income securities. SmartAsset’s asset allocation calculator can help you determine an appropriate asset allocation for your portfolio depending on your risk tolerance.
