New solution brings the power of customized portfolio and tax management to a broader spectrum of investors

Charles Schwab today announced the upcoming public launch of Schwab Personalized Indexing™, a new direct indexing solution that brings powerful tax management and portfolio management capabilities to a wider spectrum of both registered investment advisors and retail investors. The firm, which filed documents with the Securities & Exchange Commission today, expects Schwab Personalized Indexing to be available to the public by the end of April.

In making the announcement, Rick Wurster, President of The Charles Schwab Corporation, said, “Direct indexing has long been available to ultra-high net worth investors and institutions able to meet very high investment minimums. But now, thanks to technology innovations and industry developments like Schwab’s introduction of online commission-free trading, we’re able to lower the barriers to direct indexing for more investors and the advisors who serve them.”

Unlike an index mutual fund or ETF, direct indexing involves direct ownership of securities and may offer a greater level of tax management for the investor. The approach behind Schwab Personalized Indexing combines technology and human expertise. Within separately managed accounts (SMAs), Schwab Personalized Indexing employs a proprietary optimization process including daily monitoring of client portfolios and tax-loss harvesting technology that is managed by a team of investment professionals with more than two decades of direct indexing expertise.

“The launch of Schwab Personalized Indexing marks a milestone in giving investors the power to personalize their investments to fit their unique circumstances and perspectives,” said Omar Aguilar, Chief Executive Officer and Chief Investment Officer, Schwab Asset Management. “Each investor is different, and we are now able to leverage our significant scale, deep portfolio management expertise, and commitment to innovation to expand access to personalized solutions that will enable them to invest in ways that meet their distinct goals.”

Each client account is optimized based on the current holdings and unrealized tax profile, with the portfolio management team considering factors such as taxes, risks and tracking error during portfolio construction and daily management. Investors will initially have access to three index-based strategies that can be customized. Schwab Personalized Indexing strategies and their respective indexes include: a U.S. Large Cap based on the Schwab 1000 Index^®, a U.S. Small Cap based on the S&P SmallCap 600^® Index, and an Environmental, Social and Governance (ESG) based on the MSCI KLD 400 Social Index. Each strategy seeks index-like returns with enhanced after-tax benefits.

Schwab plans to roll out additional strategies, features and capabilities that will bring even more of the benefits of direct indexing — including greater customization — to retail investors and advisors over the next 12-18 months.

Schwab Personalized Indexing launches with an account minimum of $100,000 — lower than most direct indexing offerings on the market which typically start at $250,000 or higher — yet at an account size that still provides the opportunity for meaningful tax benefits to the client. Starting at a fee of 0.40%, Schwab Personalized Indexing fees are competitive and lower than many direct indexing offers available to advisors and investors today.

“Through our commitment to disrupting the status quo, reducing costs, and increasing access to personalized investing for investors, we are elevating the investing experience for our clients,” said Divya Krishnan, Schwab Product Management Director. “Personalized indexing will increasingly define what investors want. Our research shows one-third of our clients are interested in direct indexing, and we look forward to expanding the features and benefits of Schwab Personalized Indexing over time.”

Schwab believes investors of all asset levels get the most value out of direct indexing with the help of an advisor or financial consultant. Clients interested in enrolling in Schwab Personalized Indexing will work with a Schwab financial consultant to open an account or talk to their Registered Investment Advisor.

About Schwab Asset Management

One of the industry’s largest and most experienced asset managers, Schwab Asset Management offers a focused lineup of competitively priced ETFs, mutual funds and separately managed account strategies designed to serve the central needs of most investors. By operating through clients’ eyes, and putting them at the center of our decisions, we aim to deliver exceptional experiences to investors and the financial professionals who serve them. As of December 31, 2021, Schwab Asset Management managed approximately $635.8 billion on a discretionary basis and $41.5 billion on a non-discretionary basis. More information is available at www.schwabassetmanagement.com.

About Charles Schwab

At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity.

More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube and LinkedIn.

Disclosures:

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice.

Neither the tax-loss harvesting strategy nor any discussion herein is intended as tax advice, and Schwab Asset Management does not represent that any particular tax consequences will be obtained. Tax-loss harvesting involves certain risks including unintended tax implications. Investors should consult with their tax advisors and refer to Internal Revenue Service (“IRS”) website at www.irs.gov about the consequences of tax-loss harvesting.

Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market.

Please refer to the Charles Schwab Investment Management, Inc. Disclosure Brochure for additional information.

Portfolio Management for Schwab Personalized Indexing is provided by Charles Schwab Investment Management, Inc., dba Schwab Asset Management, a registered investment adviser and an affiliate of Charles Schwab & Co., Inc. ("Schwab"). Both Schwab Asset Management and Schwab are separate entities and subsidiaries of The Charles Schwab Corporation.

There are risks associated with any investment approach, and each Schwab Personalized Indexing strategy and equity market segment has their own set of risks based on client strategy selection and further customization.

Environmental, social and governance (ESG) strategies implemented by mutual funds, exchange-traded funds (ETFs), and separately managed accounts are currently subject to inconsistent industry definitions and standards for the measurement and evaluation of ESG factors; therefore, such factors may differ significantly across strategies. As a result, it may be difficult to compare ESG investment products. Further, some issuers may present their investment products as employing an ESG strategy, but may overstate or inconsistently apply ESG factors. An investment product’s ESG strategy may significantly influence its performance. Because securities may be included or excluded based on ESG factors rather than other investment methodologies, the product’s performance may differ (either higher or lower) from the overall market or comparable products that do not have ESG strategies. Environmental (“E”) factors can include climate change, pollution, waste, and how an issuer protects and/or conserves natural resources. Social (“S”) factors can include how an issuer manages its relationships with individuals, such as its employees, shareholders, and customers as well as its community. Governance (“G”) factors can include how an issuer operates, such as its leadership composition, pay and incentive structures, internal controls, and the rights of equity and debt holders. Carefully review an investment product’s prospectus or disclosure brochure to learn more about how it incorporates ESG factors into its investment strategy.

Strategies that use screening to exclude certain investments may not be able to take advantage of the same opportunities or market trends as strategies that do not use screens. There can be no assurance that the strategies will achieve their desired outcomes. Each investing strategy brings with it its own set of unique risks and benefits.

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