The Transition to Charles Schwab

Over the past Labor Day holiday weekend, our clients’ accounts were moved from TD Ameritrade to Charles Schwab as part of a merger between the two companies.  We are happy to report that all of the correct positions, balances, and histories of the accounts under our management transferred perfectly to their new home at Schwab.  In the process, the old TD Ameritrade 9-digit account numbers were changed to Schwab 8-digit account numbers.

After a month of working with Schwab as our custodian, I’d like to share what we have learned and our recommendations for making this relationship with Schwab work as smooth as possible.  The best advice we can give is to register for access to Schwab’s online account, known as Schwab Alliance.  The website is client.schwab.com.  If you have not registered yet, please hop on to the website and click on “New user.”  This will start the registration process.  You will need your account numbers, which are available on your monthly statements, or by calling our office.

Schwab Alliance

Even if you do not check your account balances often, Schwab Alliance is the easiest (and sometimes the only) way to make updates to your accounts.  For example, any changes to contact information such as address and phone number must be made through Schwab Alliance rather than through your advisors.  Also, this is the place to select your paperless settings, which include monthly statements, trade confirmations, tax forms, and shareholder materials.  Each of these can be turned on or off independently.  If you like getting monthly statements in the mail but don’t like to be overwhelmed with fund prospectuses, you can check one box and uncheck the other.  These settings can be found under Profile (upper right corner) and then “Paperless.”

As digital signatures increase in adoption, Schwab has built these features into their Schwab Alliance platform.  Getting a signature for an IRA distribution or a new account application has never been faster or more efficient, but it does require logging on to Schwab Alliance to do so.  If you are in a hurry to get funds and we haven’t set up a link to your bank account in the past, a simple e-Authorization can get those funds to your bank quickly.  However, that functionality is part of Schwab Alliance, so it is nice to have your access set up now.

A common question we have received about Schwab Alliance is how to view both your own accounts and your spouse’s accounts without logging into each user’s account separately.  There is a simple way to do this, but it requires a little bit of setup the first time.  The first step is for each spouse to set up their own login to Schwab Alliance.  Then, one spouse will share access to their accounts with the other spouse.  The sharing spouse needs to log in and click “Profile” (upper right), then “Account Access.”  To give account access to the other spouse, click the big green button that reads “Give Account Access” and then click “Give view only access.”  Select the account you would like to share and fill out the contact information for your spouse.  They will receive an email with instructions on how to add the account access you have shared with them.  This process will need to be repeated for each account you wish to share.  Once it is set up, a single login will show all the accounts in one place.

Under the Account Summary tab or the typical landing page after login, you will see all your accounts and balances.  The settings gear icon has some great features to explore.  From this page, you can give your accounts nicknames, check or uncheck the “include in total value” box, or choose whether to show online or not.  Account grouping is also an option.  For example, in my personal login screen, I have grouped my children’s custodial accounts in a separate group and elected not to show their values in the total household value figure.  You can arrange the accounts in whatever way you wish.

Once your Schwab Alliance account is set up and customized, you can access your account on your smartphone by using the “Schwab Mobile” app.  The app is an easy way to follow your accounts without booting up a computer.  Also, the app has the e-authorization feature to quickly approve one-time withdrawals from your account.  If you allow the app to send you notifications, you can be prompted to sign in to approve a withdrawal in a couple of clicks.

Institutional No Transaction Fees

A benefit of using Schwab’s platform is that some of the mutual funds in our portfolios can be bought and sold without transaction fees, even if they are an institutional fund with a lower expense ratio.  Most mutual funds have multiple share classes of the same fund.  A key distinction between the share classes is the internal expenses of the fund and whether they have a transaction fee to buy and sell shares.  Typically, the lower expense share class (usually I shares) has a transaction fee but a lower annual expense.  If we are buying enough dollars of a fund, it makes sense to pay the fee to get the lower expense.  Schwab offers several institutional funds that trade without a transaction fee but still have the lower expenses.  We were able to execute intra-class exchanges, which swapped the higher expense funds for a better share class.  These exchanges don’t trigger capital gains if they occurred in taxable accounts.

After a month of experience with Schwab, my best-case scenario is playing out.  The Schwab team has taken the best parts of Schwab and combined them with the best parts of TD Ameritrade.  Having a new system will always be a challenge to learn, but in the grand scheme, we are still able to partner with a top custodian that allows us to maintain our independence.  That means that we work for and are only compensated by our clients and no one else.  We don’t have a home office that nudges us to recommend a flavor-of-the-month investment.  That freedom is at the heart of what we do.  We are grateful and honored to have earned your business, your trust, and your friendship.