For Wealthy Investors, Schwab Takes Hand-Holding Approach
Charles Schwab & Co. was founded for investors who didn’t want their hands held.
The firm’s new Private Client service, by contrast, will be judged by how many hands it succeeds in holding--at least, hands that offer up $1 million or more in investable assets.
Private Client promises a dedicated Schwab investment consultant to handle each customer, providing advice in person, by phone or e-mail, the firm says.
The consultants aren’t required to be certified financial planners, but the majority are CFPs and chartered financial analysts, hold MBA degrees or are in pursuit of those qualifications, said Andrew Salesky, senior vice president of Private Client.
Consultants get special training in areas such as estate planning and executive compensation, Schwab says.
Here are the program’s main features:
* Financial planning and analysis. Consultants first focus on basic issues such as retirement planning, portfolio construction and asset allocation, helping clients tweak or overhaul their investment mix if needed. Consultants offer guidance on trust and estate planning, tax-sensitive investing and hedging strategies as needed. They also may meet with outside specialists retained by the client, such as an estate lawyer.
* Investment services. Clients have access to Managed Account Select, a new Schwab separate-account program that uses leading outside money managers, as well as to Schwab AdvisorSource, which refers customers to independent investment advisors, financial planners and certified public accountants.
Individual consultants make specific buy-and-sell recommendations on request, but customers have control over all trades. Customers who want to delegate management of their portfolio would be referred to either Managed Account Select or AdvisorSource, Schwab said. Specialized investment services within Private Client include charitable giving strategies and the sale of restricted or controlled securities.
* Market and investment insight. The consultants have access to research from Schwab’s U.S. Trust unit, which caters to the wealthy; the Schwab Washington Research Group, which provides investment-oriented political analysis; and the Schwab Center for Investment Research, which provides economic and industry analysis.
Customers also can get equity research from third-party providers such as Standard & Poor’s Corp.
* Monitoring. Consultants help personalize the Private Client Web site for each customer. Clients get real-time performance tracking online, e-mail alerts and customized performance reporting, including cost-basis analysis.
The cost of the Private Client service: an annualized fee ranging from 0.75% of assets to as low as 0.05%, depending on the account size and the investments chosen. Fees bottom out at 0.05% on incremental assets above $5 million that are invested in Schwab’s Mutual Fund OneSource supermarket or its in-house SchwabFunds, which generate fee revenue for the firm.
Fees aren’t applied to cash balances, only to “working” assets.
Fees cover stock and mutual fund trades, but customers must pay commissions for trading stock options, sales loads for funds that carry them and so-called markups on bonds.
Schwab Private Client investment consultants, like other Schwab employees, are compensated with salary and bonuses based on asset growth and client satisfaction, the company said. Compensation is neutral with regard to the investments selected by clients, the firm says.
A separate fee schedule, starting at 1.75% and descending with higher assets, applies to assets in Managed Account Select. The fee on assets referred to a third-party investment advisor is determined by that advisor and the client.
Some competitors say a major deficiency in Private Client is that it doesn’t offer so-called alternative investments such as hedge funds, private equity and venture capital--investments many wealthy clients increasingly want for a portion of their assets.
Salesky said the company is considering adding such services, perhaps as soon as late summer, as it expands Private Client to more cities. Demand is particularly high for hedge-fund products, he said.
Private Client also doesn’t provide some of the specialized services that competitors and independent advisors--especially those who focus on the higher end of the high-net-worth market--may offer, including “family office” management and detailed credit arrangements. Customers with those needs might be referred to U.S. Trust or to AdvisorSource participants, Salesky said.
