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Industry Spotlight > RIAs

Schwab's Direct Indexing Platform to Launch in April

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Charles Schwab says it expects to give RIAs and DIY investors a direct indexing tool by late April. 

The firm, which announced plans for Schwab Personalized Indexing in October and filed regulatory documents for the offering Thursday, says the program should give advisors and investors “powerful tax management and portfolio management capabilities.” 

Unlike with ETFs and index mutual funds, direct indexing involves direct ownership of securities and thus can involve a greater level of tax management for investors, it explains. 

The program will have an account minimum of $100,000, compared with $250,000 and up at some other firms (like Goldman Sachs), though Fidelity said earlier this year that it aims to roll out a direct indexing product with a $5,000 minimum.

Schwab’s direct indexing fees start at 0.40%, which matches the planned Fidelity Managed FidFolios. FidFolios is set to go live tomorrow for investors seeking a professionally  managed direct indexed offering; it includes fractional shares with direct indexing capabilities, according to Fidelity.

“Direct indexing has long been available to ultra-high net worth investors and institutions able to meet very high investment minimums,” according to Schwab President Rick Wurster. “But now, … we’re able to lower the barriers to direct indexing for more investors and the advisors who serve them.”

Schwab’s direct indexing program will operate within separately managed accounts and include daily monitoring of client portfolios and tax-loss harvesting technology, the firm says.

“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,” explained Schwab Asset Management CEO and Chief Investment Officer Omar Aguilar, in a statement. 

“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,” Aguilar added.

Investors will initially have access to three index-based strategies that can be customized: U.S. large cap based on the Schwab 1000 Index, U.S. small cap based on the S&P SmallCap 600 Index, and environmental, social and governance based on the MSCI KLD 400 Social Index. 

Schwab says it intends to introduce more strategies, features and capabilities to the direct indexing program, such as “greater customization” over the next 12-18 months.

(Image: Adobe Stock)