Schwab statement on investment advice regulation

Updated May 18, 2018

Schwab's position on regulatory proposals governing the Provision of Investment Advice

The Charles Schwab Corporation prides itself on seeing the world through its clients' eyes. That is why we have long supported the spirit behind regulatory proposals aimed at protecting the interests of investors by holding the industry to a high standard: acting in a client's best interest when giving investment advice, and managing and disclosing any conflicts of interest.

In March, the U.S. Court of Appeals for the 5th Circuit vacated a Department of Labor rule aimed at ensuring that investment advice in retirement accounts was delivered in a fiduciary manner. The Court's final mandate is pending while it reviews final appeals of its ruling. On April 18, the Securities and Exchange Commission proposed new rules further defining obligations for broker-dealers and registered investment advisors when they give investment recommendations on both retirement and taxable accounts.

As with the DOL proposal, we are supportive of the SEC's intent to further protect and advance the best interests of investors, while preserving investor choice and access to the markets. With the SEC's 90-day public comment period now open, we look forward to providing the Commission with additional perspective as we analyze the proposals for their impact on our clients and on our ability to serve them.

In the meantime, there will be no change in how we serve Schwab clients. We took a number of steps to meet the DOL's requirements, and do what we believe is best for investors. Despite the court's invalidation of the DOL rule, the requirements and related actions that Schwab implemented in response to the rule will remain in effect. This includes following the elements of the impartial conduct standards, including providing best interest investment advice. This is consistent with how we want to treat our clients and with the DOL's announcement that firms may continue to rely in good faith on the impartial conduct standards while the regulatory uncertainties occasioned by the 5th Circuit decision are resolved.

Independent of any regulatory mandate, we have taken a number of actions that reflect our ongoing client-focused approach, providing industry-leading value, breadth of choice and investment advice that's aligned with clients' best interests:

  • We lowered costs. We reduced standard online equity and ETF trade commissions to $4.95 and lowered options pricing to $4.95 plus $0.65 per contract*. We also lowered the expenses and eliminated the investment minimum for the Schwab market cap index mutual funds. Now, no matter how much money you have, you can invest in a single share class at the low costs historically available only to large institutions. More details are available here.
  • We introduced the Satisfaction Guarantee. Unique in our industry, our Guarantee states that if for any reason you're not completely satisfied, we'll refund your fee or commission and work with you to make things right.
  • We streamlined our compensation structure. We implemented refinements to our incentive plans so that any pay differentials support our commitment to do what is best for our clients. Our Financial Consultants' compensation varies based on the time and complexity of the services they provide rather than the revenue earned by the firm based on what a client decides to purchase. We disclose how we pay our representatives here.
  • Most importantly, we put our clients first. And we will continue to act as a fiduciary when recommending or managing client assets in all of our fee-based advisory programs, whether they are for retirement accounts or not.

Regardless of any regulatory changes, our commitment remains the same: We will continue to offer clients the same breadth of choice in our product and service offerings that we have today, and we will continue to act in our clients' best interest. We've worked hard to align our interests with theirs.

Consumers today expect great value, a great experience, and a refund if they aren't satisfied.  We believe a modern investing experience should deliver on these expectations. And it should be no surprise that, in many cases, those expectations are being met today. We are proud of our role in helping all investors achieve their goals, and look forward to continuing to do our part to ensure that they are well served and well protected.


* Restrictions apply: The $4.95 commission does not apply to foreign stock transactions, large block transactions requiring special handling, or restricted stock transactions. Foreign ordinary shares that trade online in the U.S. over-the-counter (OTC) market and do not settle in the U.S. will have a $50 foreign transaction fee added to the cost of the transaction. All broker-assisted and automated phone trades are subject to service charges. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules. Employee equity compensation transactions are subject to separate commission schedules. Multiple-leg options strategies will involve multiple commissions.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure document titled "Characteristics and Risks of Standardized Options." Supporting documentation for any claims or statistical information is available upon request. Call Schwab at 800-435-4000 for a current copy. Supporting documentation for any claims or statistical information is available upon request.