Schwab stepping up its advice game

A recent survey of Schwab's clients found that only a third of investors felt comfortable making their own investment decisions. Marie Chandoha, president and chief executive, is targeting the remainder.

Charles Schwab Investment Management Inc. plans to start providing more investment advice for clients, but it will do so through its products.
A recent survey of Schwab’s clients found that only a third of investors felt comfortable making their own investment decisions. Marie Chandoha, president and chief executive officer of Charles Schwab Investment Management Inc., is targeting the remainder.
“We’re focusing on products that embed advice to meet that client demand,” she said during a panel at the Investment Company Institute mutual fund and investment management conference.
The products, either mutual funds, exchange-traded funds of funds or separately managed accounts would combine active management with low-cost passive funds.
Asset allocation and re-balancing would be actively managed and the underlying funds either index funds or ETFs.
The focus on index funds and ETFs would allow the products to have a lower cost than traditional active funds, said Ms. Chandoha.
“The trend we’re seeing is that investors don’t want to have to worry about active managers and their higher fees,” she said.
Performance has been the main driver of the trend away from active management, she said. Almost half of U.S. large-cap mutual funds underperformed their benchmark by more than 2.5% in 2011, she said.