How We Compensate Our Investment Professionals
ARCHIVED 2023-07-02, DATE APPROXIMATE · VERSION 20230702_rev01 · COMPARED WITH 20230103_rev01
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| 1 | 1 | ## How we compensate our investment professionals |
| 2 | 2 | |
| 3 | 3 | Since Charles Schwab & Co., Inc. ("Schwab") was founded more than 40 years ago, we've been committed to serving the needs of individual investors. One of our most important beliefs is that you should understand how the financial professionals assisting you are paid, so you can evaluate the recommendations you receive. |
| 4 | 4 | |
| 5 | On these pages, we identify the different categories of investment professionals who may serve you at Schwab and describe how they are compensated. This includes both Schwab employees and independent branch franchisees (and their employees) operating Schwab Independent Branches. Compensation for investment professionals who provide recommendations is designed to support the provision of advice in the client's best interest. | |
| 5 | In these pages, we identify the different categories of investment professionals who may serve you at Schwab and describe how they are compensated. This includes both Schwab employees and independent branch franchisees (and their employees) operating Schwab Independent Branches. Compensation for investment professionals who provide recommendations is designed to support the provision of advice in the client's best interest. | |
| 6 | 6 | |
| 7 | 7 | Please note that the information below describes how Schwab pays employee professionals and shares revenue with Independent Branch professionals, not how you pay Schwab for the services you receive. Information about what you pay Schwab for the services we provide can be found at [schwab.com/pricing](https://www.schwab.com/public/schwab/investing/pricing_services/fees_minimums). |
| 8 | 8 | |
| 9 | ## Recent changes | |
| 9 | These pages summarize our compensation plans and incorporate all recent changes in effect as of July 1, 2023. | |
| 10 | 10 | |
| 11 | These pages summarize our compensation plans and incorporate all recent changes in effect as of January 1, 2023, including changes to how we pay Schwab Financial Consultants. | |
| 12 | ||
| 13 | 11 | These pages are accurate as of the date indicated above. The most recent information is available at [schwab.com/compensationdisclosure](https://www.schwab.com/compensationdisclosure). |
| 14 | 12 | |
| 15 | 13 | We invite you to read this information carefully and to contact us at **800-435-4000** if you have any questions. (For multilingual services, call **800-662-6068**. For services outside the U.S., call **+1-415-667-8400**.) |
| 16 | 14 | |
| 17 | 15 | ## Types of investment professionals |
| 18 | 16 | |
| 29 | 27 | ## VP-Financial Consultants |
| 30 | 28 | |
| 31 | 29 | <table><colgroup><col> <col></colgroup><tbody><tr><td tabindex="0"><strong>What they do </strong></td><td tabindex="0"><strong>Compensation</strong></td></tr><tr><td tabindex="0">VP-Financial Consultants work with clients both in person (through our U.S. branch office locations) and by phone. They develop new and existing client relationships, generally using a planning-based approach to understand a client's needs and objectives. They provide education and recommendations to help clients select products-including investments, banking, and insurance-that meet client objectives. Each Financial Consultant supports a practice, which includes clients who are assigned to that Financial Consultant as a primary point of contact. Financial Consultants may also assist clients who are not in their practice.</td><td tabindex="0">Financial Consultants receive a base salary for serving clients. Depending on their professional experience and past work performance, some Financial Consultants also receive <strong>Relationship Pay</strong>. In addition, Financial Consultants receive <strong>Solutions Pay</strong>. Financial Consultants may also be eligible to participate in a Career Achievement Award Program, which rewards and retains our top talent for being dedicated to Schwab and our clients. <p>Financial Consultants may give financial planning and investment advice to some of their clients. Although Schwab as a company may earn more or less revenue depending on the investment product or portfolio management service a Financial Consultant recommends, we have designed their compensation based on the time, complexity, and expertise necessary to understand, recommend, and provide ongoing service to a client for different categories of investment products and portfolio management services. <a href="https://www.schwab.com/schwabcompensation" title="Schwab.com/schwabcompensation">Schwab.com/schwabcompensation</a> includes more information on how Schwab as a company earns revenue.</p></td></tr></tbody></table> |
| 32 | 30 | |
| 33 | 31 | ## Relationship pay |
| 34 | 32 | |
| 35 | Relationship Pay compensates a Financial Consultant for maintaining relationships with and providing service to clients in their practice. Compensation is divided into three categories. The first two have different asset multiplier rates,\* which reflect the time, complexity, and expertise associated with recommending and servicing accounts in each category ("compensation factors"). Category 1 covers fee-based portfolio management services, and Category 2 covers portfolio management referrals and nonmanaged accounts. The asset multiplier rates change monthly based on fluctuations over time in assets and revenue associated with the products and services in Category 1 and Category 2. | |
| 33 | Relationship Pay compensates a Financial Consultant for maintaining relationships with and providing service to clients in their practice. Compensation is divided into three categories. The first two have different asset multiplier rates,\* which reflect the time, complexity, and expertise associated with recommending and servicing accounts in each category ("compensation factors"). Category 1 covers fee-based portfolio management services, and Category 2 covers portfolio management referrals and non-managed accounts. The asset multiplier rates change monthly based on fluctuations over time in assets and revenue associated with the products and services in Category 1 and Category 2. | |
| 36 | 34 | |
| 37 | 35 | We aggregate within each of these two categories a range of advisory programs or investment products that are similar in terms of complexity and the time, on average, it is expected to take a Financial Consultant to work with a client. We do this to guard against a Financial Consultant having undue incentives when giving investment advice. Relationship Pay applies whether a Financial Consultant recommended or sold the product or service to the client, or the client made the purchase or enrollment decision on his or her own. |
| 38 | 36 | |
| 39 | 37 | As shown in the tables below, Financial Consultants receive more compensation for some products and services than others. Financial Consultants are eligible to receive 7%, 8%, or 9% of the amount resulting from application of the asset multiplier rate, depending on a Financial Consultant's professional experience and past work performance. |
| 40 | 38 | |
| 41 | 39 | The third category of Relationship Pay is for credit products. |
| 42 | 40 | |
| 43 | 41 | ## Relationship pay based on account balances |
| 44 | 42 | |
| 45 | <table><colgroup><col> <col></colgroup><tbody><tr><td tabindex="0"><strong>Category 1</strong><p><strong>Portfolio Management Services (typically have more involved ongoing service needs)</strong></p></td><td tabindex="0"><strong>Category 1</strong><p><strong>Annual Relationship Pay per $100,000 of Client Balances</strong></p></td></tr><tr><td tabindex="0"><ul><li>Schwab Wealth Advisory™</li><li>Schwab Managed Portfolios™</li><li>Schwab Managed Account Services™ (which includes ThomasPartners® Strategies, Windhaven® Strategies, Wasmer Schroeder™ Fixed Income Strategies, Wasmer Schroeder Municipal Bond Ladder Strategies, Wasmer Schroeder Taxable Bond Ladder Strategies, Charles Schwab Investment Management Separately Managed Accounts, Diversified Portfolios, Third-Party Managers, and Schwab Personalized Indexing™) </li><li>USAA Managed Portfolios® </li><li>Annuities (for Financial Consultants with an active insurance license)</li></ul></td><td tabindex="0">The asset multiplier rate used for Category 1 could range between <strong>48 and 58</strong> basis points, which is multiplied by a Financial Consultant's particular payout rate.<p>This results in a payment between:</p><p>$33.60 (100,000 x .0048 x .07) and $40.60 (100,000 x .0058 x .07),</p><p>$38.40 (100,000 x .0048 x .08) and $46.40 (100,000 x .0058 x .08), or </p><p>$43.20 (100,000 x .0048 x .09) and $52.20 (100,000 x .0058 x .09)</p></td></tr><tr><td tabindex="0"><strong>Category 2</strong><p><strong>Portfolio Management Referrals and Nonmanaged Accounts (typically have less involved ongoing service needs)</strong></p></td><td tabindex="0"><strong>Category 2</strong><p><strong>Annual Relationship Pay per $100,000 of Client Balances</strong> </p></td></tr><tr><td tabindex="0"><ul><li>Schwab Advisor Network®</li><li>Schwab Intelligent Portfolios®</li><li>Schwab Intelligent Portfolios Premium™</li><li>Schwab Personal Trust</li><li>Wasmer Schroeder Ultra Short Strategies</li></ul>Balances in self-directed or <strong>nonmanaged </strong>accounts are treated the same, regardless of whether the assets are in affiliated or third-party products or different share classes. The payout rate is the same for stocks, bonds, mutual funds, ETFs, cash (including Schwab Bank deposits), option positions, and 529 accounts. <br></td><td tabindex="0">The asset multiplier rate used for Category 2 could range between <strong>14 and 17</strong> basis points, which is multiplied by a Financial Consultant's particular payout rate. <p>This results in a payment between: </p><p>$9.80 (100,000 x .0014 x .07) and $11.90 (100,000 x .0017 x .07), </p><p>$11.20 (100,000 x .0014 x .08) and $13.60 (100,000 x .0017 x .08), or </p><p>$12.60 (100,000 x .0014 x .09) and $15.30 (100,000 x .0017 x .09)</p></td></tr><tr><td tabindex="0"><strong>Category 3</strong><p><strong>Non-Investment Advice Products and Activities</strong> </p></td><td tabindex="0"></td></tr><tr><td tabindex="0">Credit Products: <div><ul><li>Margin Loans Schwab Bank</li><li>Home Equity Line of Credit (HELOC)</li><li>Schwab Bank Pledged Asset Line® (PAL) </li></ul></div><p>Financial Consultants receive a payment of 4.4 basis points per $100,000 of client loan balance. This results in an annual payment of $44 per $100,000 loan ($100,000 × .00044).</p></td><td tabindex="0"></td></tr></tbody></table> | |
| 43 | <table><colgroup><col> <col></colgroup><tbody><tr><td tabindex="0"><strong>Category 1</strong><p><strong>Portfolio Management Services (typically have more involved ongoing service needs)</strong></p></td><td tabindex="0"><strong>Category 1</strong><p><strong>Annual Relationship Pay per $100,000 of Client Balances</strong></p></td></tr><tr><td tabindex="0"><ul><li>Schwab Wealth Advisory™</li><li>Schwab Managed Portfolios™</li><li>Schwab Managed Account Services™ (which includes ThomasPartners® Strategies, Windhaven® Strategies, Wasmer Schroeder™ Fixed Income Strategies, Wasmer Schroeder Municipal Bond Ladder Strategies, Wasmer Schroeder Taxable Bond Ladder Strategies, Charles Schwab Investment Management Separately Managed Accounts, Diversified Portfolios, Third-Party Managers, and Schwab Personalized Indexing™) </li><li>USAA Managed Portfolios® </li><li>Annuities (for Financial Consultants with an active insurance license)</li></ul></td><td tabindex="0">The asset multiplier rate used for Category 1 could range between <strong>48 and 58</strong> basis points, which is multiplied by a Financial Consultant's particular payout rate.<p>This results in a payment between:</p><p>$33.60 (100,000 x .0048 x .07) and $40.60 (100,000 x .0058 x .07),</p><p>$38.40 (100,000 x .0048 x .08) and $46.40 (100,000 x .0058 x .08), or </p><p>$43.20 (100,000 x .0048 x .09) and $52.20 (100,000 x .0058 x .09)</p></td></tr><tr><td tabindex="0"><strong>Category 2</strong><p><strong>Portfolio Management Referrals and Non-managed Accounts (typically have less involved ongoing service needs)</strong></p></td><td tabindex="0"><strong>Category 2</strong><p><strong>Annual Relationship Pay per $100,000 of Client Balances</strong> </p></td></tr><tr><td tabindex="0"><ul><li>Schwab Advisor Network®</li><li>Schwab Intelligent Portfolios®</li><li>Schwab Intelligent Portfolios Premium™</li><li>Schwab Personal Trust</li><li>Wasmer Schroeder Ultra Short Strategies</li></ul>Balances in self-directed or non-managed<strong> </strong>accounts are treated the same, regardless of whether the assets are in affiliated or third-party products or different share classes. The payout rate is the same for stocks, bonds, mutual funds, ETFs, cash (including Schwab Bank deposits), option positions, and 529 accounts. <br></td><td tabindex="0">The asset multiplier rate used for Category 2 could range between <strong>14 and 17</strong> basis points, which is multiplied by a Financial Consultant's particular payout rate. <p>This results in a payment between: </p><p>$9.80 (100,000 x .0014 x .07) and $11.90 (100,000 x .0017 x .07), </p><p>$11.20 (100,000 x .0014 x .08) and $13.60 (100,000 x .0017 x .08), or </p><p>$12.60 (100,000 x .0014 x .09) and $15.30 (100,000 x .0017 x .09)</p></td></tr><tr><td tabindex="0"><strong>Category 3</strong><p><strong>Non-Investment Advice Products and Activities</strong> </p></td><td tabindex="0"></td></tr><tr><td tabindex="0">Credit Products: <div><ul><li>Margin Loans Schwab Bank</li><li>Home Equity Line of Credit (HELOC)</li><li>Schwab Bank Pledged Asset Line® (PAL) </li></ul></div><p>Financial Consultants receive a payment of 4.4 basis points per $100,000 of client loan balance. This results in an annual payment of $44 per $100,000 loan ($100,000 × .00044).</p></td><td tabindex="0"></td></tr></tbody></table> | |
| 46 | 44 | |
| 47 | 45 | \*The asset multiplier rate range is based on fluctuations in revenue and assets over time. |
| 48 | 46 | |
| 49 | 47 | ## Relationship Pay Based on Account Balances - conclusion |
| 50 | 48 | |
| 51 | 49 | When a client in a Financial Consultant's practice is enrolled in a participating portfolio management service and receives a refund of their program fee under the Schwab Satisfaction Guarantee, Schwab will debit the amount of Relationship Pay the Financial Consultant receives by a percentage of the amount of the fee refunded. |
| 55 | 53 | Solutions Pay compensates a Financial Consultant for attracting new clients and assets to Schwab and recommending appropriate products and portfolio management services. It is a one-time payment and applies whether a Financial Consultant recommends a product or service or the client makes the purchase or enrollment decision on his or her own. The exceptions are for Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™, which the Financial Consultant must recommend, and into which the client must enroll in order for the Financial Consultant to receive Solutions Pay. |
| 56 | 54 | |
| 57 | 55 | Category 1, asset consolidation, pays the same rate no matter what investment product a Financial Consultant might recommend or a client might purchase on his or her own. Category 2, which includes most portfolio management services (except for Wasmer Schroeder Ultra Short Strategies), pays the same rate no matter which service a Financial Consultant might recommend. The different rates paid between Category 1 and Category 2 are based on the additional time, complexity, and expertise necessary to assess a client's needs and recommend our portfolio management services. Category 3, other products, includes activities in which a Financial Consultant is not providing investment advice. Generally, if assets leave a Financial Consultant's practice, that loss is netted against asset gains to a Financial Consultant's practice for purposes of calculating Solutions Pay. |
| 58 | 56 | |
| 59 | 57 | Solutions Pay is paid to the Financial Consultant monthly. |
| 60 | 58 | |
| 61 | <table><colgroup><col> <col> <col></colgroup><tbody><tr><td tabindex="0"><strong>Category 1 </strong><p><strong>Asset Consolidation</strong></p></td><td tabindex="0"><strong>Category 1 </strong><p><strong>Financial Consultant's Compensation<sup>1</sup></strong></p></td><td tabindex="0"><strong>Category 1 </strong><p><strong>One-Time Solutions Payment</strong></p></td></tr><tr><td tabindex="0">Net Asset Flows (total inflow of client assets minus the total outflow of client assets)</td><td tabindex="0">0.0008 x Net Asset Flows</td><td tabindex="0">$80 per $100,000 of Client Balances</td></tr><tr><td tabindex="0"><strong>Category 2</strong> <p><strong>Portfolio Management Services* </strong></p></td><td tabindex="0"><strong>Category 2</strong> <p><strong>Financial Consultant's Compensation<sup>1</sup></strong></p></td><td tabindex="0"><strong>Category 2</strong> <p><strong>One-Time Solutions Payment</strong></p></td></tr><tr><td tabindex="0"><ul><li>Schwab Wealth Advisory™ </li><li>Schwab Intelligent Portfolios® </li><li>Schwab Intelligent Portfolios Premium™ </li><li>Schwab Advisor Network® </li><li>Schwab Personal Trust-Full Corporate Trustee </li><li>Schwab Managed Portfolios™ </li><li>Schwab Managed Account Services™ (which includes ThomasPartners® Strategies, Windhaven® Strategies, Wasmer Schroeder™ Fixed Income Strategies, Wasmer Schroeder Municipal Bond Ladder Strategies, Wasmer Schroeder Taxable Bond Ladder Strategies, Charles Schwab Investment Management Separately Managed Accounts, Diversified Portfolios, Third-Party Managers, and Schwab Personalized Indexing™) </li><li>USAA Managed Portfolios®</li></ul></td><td tabindex="0">0.002 x amount enrolled </td><td tabindex="0">$200 per $100,000 of Client Balances</td></tr><tr><td tabindex="0">Annuities by a Financial Consultant with an active insurance license</td><td tabindex="0">0.002 x annuity amount </td><td tabindex="0">$200 per $100,000 of Client Balances</td></tr><tr><td tabindex="0"><strong>Category 3 </strong><p><strong>Other Products</strong></p></td><td tabindex="0"><strong>Category 3 </strong><p><strong>Financial Consultant's Compensation<sup>1</sup></strong></p></td><td tabindex="0"><strong>Category 3</strong><p><strong>One-Time Solutions Payment </strong><br></p></td></tr><tr><td tabindex="0">Introductions to Charles Schwab Bank, SSB for mortgages by Financial Consultants who are also employees of Charles Schwab Bank, SSB</td><td tabindex="0">0.002 × loan amount for new mortgages; <p>0.0011 × loan amount for refinanced loans </p></td><td tabindex="0">$200 per $100,000 of Client Balances <p>$110 per $100,000 of Client Balances </p></td></tr><tr><td tabindex="0">Schwab Personal Trust - Successor Trustee </td><td tabindex="0">$175 per household designation </td><td tabindex="0">$175 </td></tr><tr><td tabindex="0">Referrals to a Schwab Charitable™ donor-advised fund<sup>2</sup></td><td tabindex="0">$175 per converted referral for new accounts over $25,000</td><td tabindex="0">$175 </td></tr><tr><td tabindex="0">Referrals to Life Insurance by a Financial Consultant with an active insurance license</td><td tabindex="0">$450 per converted referral </td><td tabindex="0">$450 </td></tr><tr><td tabindex="0">Referrals to Long-Term Care Insurance by a Financial Consultant with an active insurance license</td><td tabindex="0">$450 per converted referral</td><td tabindex="0">$450</td></tr><tr><td tabindex="0">Referrals to Schwab Advisor Services™ </td><td tabindex="0">$800 for referrals up to $30 million; <p>$3,500 for referrals of $30+ million </p></td><td tabindex="0">$800 or $3,500</td></tr><tr><td tabindex="0">Referrals to Schwab Retirement Plan Services or Retirement Business Services </td><td tabindex="0">0.002 × amount of assets referred; <p>$250,000 minimum asset level to $10,000,000 maximum asset level </p></td><td tabindex="0">$500 for a $250,000 referral</td></tr></tbody></table> | |
| 59 | <table><colgroup><col> <col> <col></colgroup><tbody><tr><td tabindex="0"><strong>Category 1 </strong><p><strong>Asset Consolidation</strong></p></td><td tabindex="0"><strong>Category 1 </strong><p><strong>Financial Consultant's Compensation<sup>1</sup></strong></p></td><td tabindex="0"><strong>Category 1 </strong><p><strong>One-Time Solutions Payment</strong></p></td></tr><tr><td tabindex="0">Net Asset Flows (total inflow of client assets minus the total outflow of client assets)</td><td tabindex="0">0.0008 x Net Asset Flows</td><td tabindex="0">$80 per $100,000 of Client Balances</td></tr><tr><td tabindex="0"><strong>Category 2</strong> <p><strong>Portfolio Management Services* </strong></p></td><td tabindex="0"><strong>Category 2</strong> <p><strong>Financial Consultant's Compensation<sup>1</sup></strong></p></td><td tabindex="0"><strong>Category 2</strong> <p><strong>One-Time Solutions Payment</strong></p></td></tr><tr><td tabindex="0"><ul><li>Schwab Wealth Advisory™ </li><li>Schwab Intelligent Portfolios® </li><li>Schwab Intelligent Portfolios Premium™ </li><li>Schwab Advisor Network® </li><li>Schwab Personal Trust-Full Corporate Trustee </li><li>Schwab Managed Portfolios™ </li><li>Schwab Managed Account Services™ (which includes ThomasPartners® Strategies, Windhaven® Strategies, Wasmer Schroeder™ Fixed Income Strategies, Wasmer Schroeder Municipal Bond Ladder Strategies, Wasmer Schroeder Taxable Bond Ladder Strategies, Charles Schwab Investment Management Separately Managed Accounts, Diversified Portfolios, Third-Party Managers, and Schwab Personalized Indexing™) </li><li>USAA Managed Portfolios®</li></ul></td><td tabindex="0">0.002 x amount enrolled </td><td tabindex="0">$200 per $100,000 of Client Balances</td></tr><tr><td tabindex="0">Annuities by a Financial Consultant with an active insurance license</td><td tabindex="0">0.002 x annuity amount </td><td tabindex="0">$200 per $100,000 of Client Balances</td></tr><tr><td tabindex="0"><strong>Category 3 </strong><p><strong>Other Products</strong></p></td><td tabindex="0"><strong>Category 3 </strong><p><strong>Financial Consultant's Compensation<sup>1</sup></strong></p></td><td tabindex="0"><strong>Category 3</strong><p><strong>One-Time Solutions Payment </strong><br></p></td></tr><tr><td tabindex="0">Introductions to Charles Schwab Bank, SSB for mortgages by Financial Consultants who are also employees of Charles Schwab Bank, SSB</td><td tabindex="0">0.002 × loan amount for new mortgages; <p>0.0011 × loan amount for refinanced loans </p></td><td tabindex="0">$200 per $100,000 of loan amount <p>$110 per $100,000 of loan amount</p></td></tr><tr><td tabindex="0">Schwab Personal Trust - Successor Trustee </td><td tabindex="0">$175 per household designation </td><td tabindex="0">$175 </td></tr><tr><td tabindex="0">Referrals to a Schwab Charitable™ donor-advised fund<sup>2</sup></td><td tabindex="0">$175 per converted referral for new accounts over $25,000</td><td tabindex="0">$175 </td></tr><tr><td tabindex="0">Referrals to Life Insurance by a Financial Consultant with an active insurance license</td><td tabindex="0">$450 per converted referral </td><td tabindex="0">$450 </td></tr><tr><td tabindex="0">Referrals to Long-Term Care Insurance by a Financial Consultant with an active insurance license</td><td tabindex="0">$450 per converted referral</td><td tabindex="0">$450</td></tr><tr><td tabindex="0">Referrals to Schwab Advisor Services™ </td><td tabindex="0">$800 for referrals up to $30 million; <p>$3,500 for referrals of $30+ million </p></td><td tabindex="0">$800 or $3,500</td></tr><tr><td tabindex="0">Referrals to Schwab Retirement Plan Services or Retirement Business Services </td><td tabindex="0">0.002 × amount of assets referred; <p>$250,000 minimum asset level to $10,000,000 maximum asset level </p></td><td tabindex="0">$500 for a $250,000 referral</td></tr></tbody></table> | |
| 62 | 60 | |
| 63 | 61 | \*Excludes Wasmer Schroeder Ultra Short Strategies. |
| 64 | 62 | |
| 65 | 63 | 1\. Schwab may cap the amount of incentive compensation that a Financial Consultant can earn from any one client from the Solutions Pay component. |
| 66 | 64 | |
| 67 | 65 | 2\. Schwab Charitable is the name used for the combined programs and services of Schwab Charitable Fund™, an independent nonprofit organization. Schwab Charitable Fund has entered into service agreements with certain affiliates of The Charles Schwab Corporation. |