Schwab raises advisory fees for $5M–$25M clients

Charles Schwab will raise marginal advisory fees effective Jan. 1 for clients with $5 million to $25 million in assets. Accounts with $5 million to $10 million will move to a 0.55% marginal rate and accounts with $10 million to $25 million will move to a 0.45% marginal rate.

The schedule for the changes was published this week and applies to clients who join Schwab Wealth Advisory on or after Oct. 1. Schwab noted that most existing clients will not see an overall fee increase and said asset aggregation may lower fees for some customers. The firm also committed to limiting any transition-related increase for current Schwab Wealth Advisory clients to no more than 5% at the billing group level.

Schwab is consolidating several separately managed account offerings into Schwab Wealth Advisory. Portfolios formerly managed under names such as Managed Account Select, Managed Account Connection and Schwab Managed Portfolios will move to a single pricing structure. The company will eliminate the quarterly minimum for lower-balance advisory accounts in the fourth quarter. Fees for accounts under $5 million will remain unchanged; for example, the fee for accounts up to $1 million will stay at 0.8%.

The updated pricing is marginal, meaning the higher rates apply only to assets inside the specified tiers rather than to a client’s entire portfolio. Schwab also introduced new fees for separately managed accounts run by outside asset managers, effective Jan. 1: a 0.35% fee on equities, 0.15% on bonds and other fixed-income securities, and 0.10% on municipal bond ladders.

Schwab Wealth Advisory held just over $218 billion in client assets at the end of December. CEO Rick Wurster noted on an earnings call that roughly 5% of retail brokerage clients currently pay for advice while internal polling indicates about 31% would be willing to pay for advice. The firm has said it plans to expand its advisory staff beyond about 3,000 financial consultants and to add services including access to private equity and family-office capabilities.

Industry observers offered differing views. Tim Welsh, founder of Nexus Strategies, noted Schwab has room to raise prices after years of lower fees and observed the firm remains less expensive than many competitors. Mike Papedis, founder of Fusion Financial Partners, said the changes align with Schwab’s effort to compete for ultra-high-net-worth clients and pointed to recent acquisitions and added services consistent with that aim. William Trout, director of securities and investments at Datos Insights, suggested the fee changes may help offset pressure on other revenue sources, including earnings on client cash, and that the new charges for third-party managed accounts are consistent with protecting advisory margins.

Schwab also narrowed the criteria for referring clients to outside RIAs. The minimum asset threshold for referrals through its Schwab Advisor Network will rise to $5 million on Jan. 5 from $2 million; the referral floor had been $500,000 at the start of the year. Schwab indicated it does not expect the growth of in-house advice to pose a threat to independent advisors that use Schwab as custodian and service provider, noting the large total pool of U.S. retail wealth as a reason multiple firms can operate in the market.