Advisors and retail investors will have access to portfolio and tax management tools through a direct indexing program launched by Charles Schwab, the firm announced today.
Schwab Personalized Indexing is a direct indexing solution. “Unlike an indexed mutual fund or ETF, direct indexing involves direct ownership of securities and may offer a greater level of tax management for the investor,” Schwab said.
With Schwab Personalized Indexing, investors will initially have access to three index-based strategies, which are a U.S. large cap based on the Schwab 1000 Index, a U.S. small cap based on the S&P Small Cap 600 Index, and an Environmental, Social and Governance based on MSCI KLD 400 Social Index. Each strategy seeks index-like returns with enhanced after-tax benefits.
“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 they can talk to their own RIA,” the firm said.
Schwab plans to roll out additional strategies, features and capabilities to bring of the benefits of direct indexing, including greater customization, to advisors and retail investors over the next 12 months to 18 months.
The personalized indexing program is designed to optimize the client’s account based on the holdings and the unrealized tax profile, with the portfolio management team considering factors such as taxes, risks and tracking error during portfolio construction and daily management, Schwab explained. It includes automated monitoring of the clients’ portfolios, using tax-loss harvesting technology that is managed by a team of investment professionals.
Schwab Personalized Indexing has an account minimum of $100,000, instead of the more typical minimum of $250,000 for personal indexing accounts with a fee of forty basis points.