

How Does Charles Schwab & Co., Inc. Compensate its Representatives?

At Charles Schwab & Co., Inc., we are committed to avoiding, minimizing, and managing conflicts of interest between our clients and our representatives.  One way that we do this is by carefully structuring our incentive compensation plans.  At Schwab, you can be assured that the representative assisting or serving you is not biased by compensation or incentives that favor recommending one stock or mutual fund over another, and is not paid on sales commissions for trades.  We think investors are entitled to know how their brokers are paid.  Accordingly, we are pleased to provide you with the following information to help you clearly understand how we pay and reward investment representatives at Charles Schwab & Co., Inc.

Through this website, which is updated periodically, our intention is to give our clients and others access to a summary of our compensation practices.  As you review the information below, note that we are always reviewing the way that we do business and may change our compensation structure in the future. 

We use a number of different methods to compensate our brokers, depending on their location, function, and the client segments that they serve.  Please click on the links below or scroll down to learn more about how each type of representative is compensated.
 

Investor Centers

In General.   Brokers in our investor centers receive a salary and may be eligible to receive a quarterly bonus.  Quarterly bonuses are calculated by using a credit system, which considers the amount of credits that each broker has earned during the quarter.  Our brokers earn credits when their clients bring new assets to Schwab, retain their assets at Schwab over time, and when the brokers recommend services and products which their clients purchase to meet their financial needs.

The credit system is carefully designed to enable our brokers to make product and service recommendations without being improperly influenced by their incentive compensation.  To determine the amount of credits assigned to each service or product, Schwab considers the following factors:  the economic value to Schwab, conflicts of interest principles, the time that it typically takes a broker to explain the service, and the expected value for the client. 

In addition, we recognize and reward efforts by our branches to retain and develop select customers using a team-based approach.  Branches receive their bonuses based on their performance against a team target.  Branch managers then distribute the bonuses to their brokers based on individual performance and client satisfaction survey results. 
 

How Do Brokers in Schwab’s Investor Centers Receive Credits that Count Toward Their Bonus When I Purchase or Invest In…

- Ongoing Advised Relationships
 

Brokers serving our affluent clients may recommend one of the following Schwab services that includes an ongoing relationship and advice for an asset-based fee:

1.        Schwab Private Client™,

2.        Schwab Advisor Network®,

3.        U.S. Trust®,

4.        Schwab Advised Investing Signature™.

When a client selects one of these services, the broker who made the recommendation receives credits that are equal to the dollar amount that the client invests.  Regardless of which option the client chooses, brokers receive the same, asset-based credits when they refer clients to Schwab Private Client, Schwab Advisor Network, U.S. Trust, or Schwab Advised Investing Signature.  By paying the same incentives for services of a similar type, we encourage our brokers to recommend the solution that is in the client’s best interests. 

Brokers may receive additional credits when they refer a client to one of these services if the client brings new assets to Schwab.  In addition, brokers may also receive credits when they direct clients to additional U.S. Trust products and services in the course of a U.S. Trust referral.

Other clients who are seeking an advised relationship may prefer to enroll in Schwab’s core advice offer, Schwab Advised Investing Foundational™.  This service provides ongoing advice by a team of brokers for a flat fee.  When brokers refer clients to this offer, they receive a fixed number of credits. 

- One-time Advice Consultations
 

When our clients are in need of a one-time advice consultation, our brokers can refer them to a Schwab Investment Consultant.  When brokers make these referrals, they earn credits which vary based on the type of advice consultation that the client selects.

We assign the same amount of credits to our brokers for referrals to our Foundational Consultation (primarily mutual fund advice) as we do for referrals to our Comprehensive Portfolio Consultation (for more affluent clients).  The reason is that these products provide a comparable level of benefit and also typically require brokers to spend a similar amount of time explaining the product.  However, we assign a higher number of credits for referrals to Retirement Consultations and higher still for Personal Financial Plans, as these products involve more time to explain and provide more value to the client.  By doing so, we provide the same reward to the broker for referring clients to products and services of the same class, and we also reward the broker for spending additional time with our clients where appropriate.  As a result, we encourage them to recommend the solution that’s best for the client.
 

- Other Products and Services
 

Our brokers also earn incentive credits when they help their clients select other products and services to meet their clients’ financial needs.  The amount of credits that brokers can earn varies depending on the type of product or service.    However, we do not pay our brokers differently for recommending Schwab’s own investment products or the products of other companies.

For clients who consider themselves independent investors,, our brokers may suggest several options.  When brokers recommend Schwab Independent Investing Foundational™, they receive credits for new assets when they refer or enroll clients into this product.  When brokers enroll clients into Schwab Independent Investing Signature™, the broker receives credits for new assets as well as a fixed number of credits, unless the client has consolidated sufficient assets to qualify for a fee waiver.  When a client qualifies for a fee waiver, the broker simply receives credits for new assets that the client brings to Schwab.

For clients who are interested in annuities, our brokers can assist in one of two ways.  Brokers who do not hold insurance licenses can refer clients to licensed Schwab brokers.  When these referrals result in completed applications, these brokers receive a fixed number of credits.  The amount of credits does not depend on the completion of the sale, nor are they based on the value of the annuity.  Furthermore, referring brokers receive credits only when clients rollover existing annuities, and not when they purchase annuities with new assets.  Brokers who have insurance licenses can help clients purchase annuities directly.  They receive credits when clients apply for the annuity, and alternatively may receive credits when a purchase is made with assets that are new to Schwab.

For clients who are seeking term life insurance, our brokers can refer them to a third party provider for assistance.  In this situation, the referring broker receives a fixed number of credits for each completed application.  As with annuities, the amount of credits does not depend on the completion of the sale, nor are they based on the value of the life insurance policy.      

When our clients are in need of mortgages and home equity loans, brokers can refer them to Schwab Bank.  Brokers receive credits toward their bonus when referrals result in accepted and committed loan applications.  The amount of credits that brokers can receive is predetermined and depends on whether the mortgage is a standard, jumbo, or super-jumbo.   

Another way that our brokers serve our clients and earn credits is by helping clients consolidate at Schwab any margin loans held at other financial institutions.  When this happens, brokers receive credits based on the dollar amount of any outstanding margin loans that are transferred to Schwab.  Our brokers are not compensated for any new margin debt that a customer chooses to incur.
 

- Active Trader 
 

When our brokers identify clients who are actively trading at Schwab or another firm, they may refer them to the Active Trader sales team to enroll in one of our active trader services.    Brokers receive credits that apply toward their bonuses when the clients they refer are qualified by the Active Trader sales team and  a successful placement results.  A successful placement is measured by an incremental increase in trading due to a client consolidating his trading at Schwab or otherwise using Schwab’s tools for traders.   

What Are Other Sources of Compensation for Brokers in Schwab’s Investor Centers?
 

From time to time, local branches, a region, or our national network of branches may participate in short-term incentive plans, or STIPs.  STIPs are temporary incentives that usually focus on a class of products or services.  The goal of a STIP is typically to educate our representatives and raise their awareness about products and services and how they may serve our clients’ needs.  Generally, STIPs are based on the same criteria and principles as our incentive compensation plans discussed on this website. 

Brokers who demonstrate exceptional performance during the year may be eligible for additional rewards through Schwab’s Chairman’s Club.  Through this program, brokers who serve retail customers and distinguish themselves from their peers as measured by sales results  can earn a trip to be held in the first quarter of the following year.  In all cases, specific eligibility requirements must be met including time spent in a customer-facing role and performance management standards.  Importantly, for managers to be eligible, their branches or teams must achieve acceptable ratings in routine compliance examinations.

Another reward that Schwab offers to brokers serving in its Investor Centers is participation in President’s Club.  This program provides restricted stock to top performing brokers and managers in order to recognize exceptional performance for the year based on sales results.

[back to top]

Service Centers

In General.  Brokers who provide a service function to clients receive a salary and may be eligible for a quarterly bonus.  Service center brokers earn points toward their bonuses through both team-based and individual performance factors.

The team’s bonus is determined by corporate profitability, enterprise profitability and national sales results.  The bonus is then allocated among the team members based on individual contributions in areas such as client satisfaction, teamwork, leadership, and productivity.

The individual portion of the bonus is calculated by using a credit system, which considers the amount of points that each broker has earned during the quarter.  Brokers receive points when their clients bring new assets to Schwab, and when they recommend products and services which clients purchase to meet their financial needs.  There is a fixed number of points that is associated with each Schwab product or service.

The point system is carefully designed to enable our brokers to make product and service recommendations without being improperly influenced by their incentive compensation.   To determine the amount of points assigned to each type of advice consultation, Schwab considers the economic value to Schwab, conflicts of interest principles, the time that it typically takes for a broker to explain the service, and the expected value to the client.

How Do Brokers at Schwab’s Service Centers Earn Points That Count Towards Their Bonus When I Purchase or Invest In…
 

- Ongoing Advised Relationships
 

Service center brokers assisting our affluent clients may recommend one of the following Schwab services that include an ongoing relationship and advice for an asset-based fee:  Schwab Private Client™, Schwab Advisor Network®, U.S. Trust® and Schwab Advised Investing Signature™.  When a client selects one of these services, the broker who made the recommendation receives points.  Regardless of which option the client chooses, brokers receive the same number of points when they refer clients to Schwab Private Client, Schwab Advisor Network, U.S. Trust, or Schwab Advised Investing Signature.  By paying the same incentives for services of a similar type, we encourage our brokers to recommend the solution that is in the client’s best interests.

Brokers also receive a single point when they provide a referral which causes a client to bring new assets above a minimum threshold amount to Schwab.

Some clients may choose to enroll in Schwab Advised Investing Foundational™, which provides ongoing advice by a team of brokers for a flat fee.  We assign a fixed number of points to brokers who refer clients into this offer.
 

- One-Time Advice Consultations
 

When our clients are in need of a one-time advice consultation, brokers in our service centers can refer them to a Schwab Investment Consultant.  When brokers make these referrals, they receive points which vary based on the type of advice consultation that the client selects. 

We assign the same number of points to our brokers for referrals to our Foundational Consultation (primarily mutual fund advice) as we do for referrals to our Comprehensive Portfolio Consultation (for more affluent clients) and to Retirement Consultations.  The reason is that each of these products requires our brokers to spend similar amount of time identifying whether the client is appropriate for the product, and referring the client to an investment specialist.  However, we assign a higher number of points for referrals for Personal Financial Plans, as this product involves more time to explain when service brokers make a referral.  By doing so, we reward the broker for spending additional time with our clients where appropriate.  As a result, we encourage them to recommend the solution that’s best for the client. 

- Mortgages and Home Equity Loans
 

When clients are in need of mortgages or home equity loans, brokers in our service centers can help by referring their clients to a Schwab Bank specialist.  When these referrals result in accepted and committed loan applications, brokers receive a fixed number of points that are applied toward their bonus. 

- Active Trader 
 

When our brokers identify clients who are actively trading at another firm or at Schwab, they may refer them to the Active Trader sales team to enroll in one of our active trader services.  Brokers receive points that apply toward their bonuses when the clients they refer are qualified by the Active Trader sales team and a successful placement results.  A successful placement is measured by an incremental increase in trading due to a client consolidating his trading at Schwab or otherwise using Schwab’s tools for traders.

What are Other Sources of Compensation for Brokers in Schwab’s Service Centers?
 

From time to time, our service centers may participate in short-term incentive plans, or STIPs.  STIPs are temporary incentives that usually focus on a class of products or services.  The goal of a STIP is typically to educate our representatives and raise their awareness about products and services and how they may serve our clients’ needs.  Generally, STIPs are based on the same criteria and principles as our incentive compensation plans discussed on this website.   

Brokers who demonstrate exceptional performance during the year may be eligible for additional rewards through Schwab’s Chairman’s Club.  Through this program, brokers who serve retail clients and distinguish themselves from their peers as measured by objective results tied to their incentive compensation plans can earn a trip to be held in the first quarter of the year or points that can be redeemed for merchandise.  In all cases, specific eligibility requirements must be met including time spent in a client-facing role and performance management standards.

[back to top]

Business Development Teams  

In General.   Our Business Development teams are primarily responsible for responding to client or prospect questions and contacting them about Schwab’s products and services.  They receive a salary and may be eligible for a quarterly bonus.  Quarterly bonuses are calculated based on the performance of the individual brokers as well as the performance of their team.

To calculate the individual portion of the bonus, we use a credit system which considers the amount of credits that each broker has received during the quarter above the broker’s individual asset threshold.  Brokers who make outbound calls earn credits when their clients bring new assets to Schwab, select  products and services, and retain assets at Schwab over time.  Brokers who take inbound calls also earn credits when their clients bring new assets to Schwab and choose products and services, and are measured based on client satisfaction as well.

The credit system for all business development brokers is carefully designed to enable them to make specific product and service recommendations without being improperly influenced by their incentive compensation.  To determine the amount of credits assigned to each type of product or service, Schwab considers the economic value to Schwab, conflicts of interest principles, the time that it usually takes for a broker to explain the service, and the expected value to the client.

The team component encourages brokers to help clients find solutions which meet their financial needs.  Brokers earn credits which are called partnership points by helping our clients navigate among the various products and services that we offer and referring them to other team members for more information or qualification.  In addition, bonuses for outbound teams include a component to support retention of our client base.  When we award the team component to individuals, we rank our business development brokers against each other and allot a higher percentage of the overall bonus pool to the top tier brokers for their efforts.

How Do Business Development Representatives Earn Credits Toward Their Bonuses When I Purchase or Invest In…

- Ongoing Advised Relationships
 

Our Business Development brokers often assist affluent clients by recommending one of the following Schwab services that includes an ongoing relationship and advice for an asset-based fee:  Schwab Private Client™, Schwab Advisor Network®, U.S. Trust® and Schwab Advised Investing Signature™.  When our brokers place clients in these services, they receive credits toward either the team or individual component of their quarterly bonuses, depending on the role that the broker plays in the placement.  Brokers who directly place their client into Schwab Advised Investing Signature are eligible to receive credits that are equal to the dollar amount that the client invests.  Brokers who refer clients to other Schwab representatives for placement receive partnership points.  The amount of partnership points is the same regardless of whether the client chooses Schwab Private Client, Schwab Advisor Network, Schwab Advised Investing Signature, or U.S. Trust.      

Some clients may opt to enroll in Schwab’s core advice offer, Schwab Advised Investing Foundational™, which provides clients with ongoing advice by a team of brokers for a flat fee.   Brokers earn a fixed number of credits when they refer clients into this offer.

- One-Time Advice Consultations
 

When our clients are in need of a one-time advice consultation, our brokers can refer clients to a Schwab Investment Consultant.  Brokers who make these referrals receive credits which vary based on the type of advice consultation that the client selects. 

We assign the same amount of credits to our brokers for referrals to our Foundational Consultation (primarily mutual fund advice) as we do for referrals to our Comprehensive Portfolio Consultation (for more affluent clients).  The reason is that these products provide a comparable level of benefit and generally require brokers to spend a comparable amount of time explaining the product.  However, we assign a higher number of credits for referrals to Retirement Consultations and higher still for Personal Financial Plans, as these products involve more time to explain and provide more value to the client.  By doing so, we provide the same reward to the broker for referring clients to products and services of the same class and we also reward the broker for spending additional time with our clients where appropriate.  As a result, we encourage them to recommend the solution that’s best for the client. 

- Other Products and Services
 

Our brokers also receive incentive credits when they help our clients select other types of products and services that we offer.  The amount of credits that brokers can receive varies depending on the type of product or service.    However, we do not pay our brokers differently for recommending Schwab’s investment products or the products of other companies.

For clients who consider themselves independent investors, our brokers may suggest several options.  When brokers recommend Schwab Independent Investing Foundational™, they receive credits for new assets when they refer or enroll clients into this product.  When brokers enroll clients into Schwab Independent Investing Signature™, the broker receives credits for new assets as well as a fixed amount of credits, unless the client has consolidated sufficient assets to qualify for a fee waiver.  When a client does qualify for a fee waiver, the broker simply receives credits for new assets the client brings to Schwab.

Brokers can also help their clients find appropriate mortgages and home equity loans by providing a referral to a Schwab Bank specialist.  When these referrals result in accepted and committed loan applications, brokers receive credits that are applied toward their bonus.  The amount of credits that brokers can receive is predetermined and depends on whether the mortgage is a standard, jumbo, or super-jumbo.  

Brokers can also help our clients to consolidate margin loans held at other financial institutions at Schwab.  When this happens, brokers receive credits based on the dollar amount of any outstanding margin loans that are transferred to Schwab.  Our brokers are not compensated for any new margin debt that a customer chooses to incur.

- Active Trader 
 

When our brokers identify clients who are actively trading at Schwab or at another firm, they may refer them to the Active Trader sales team to enroll in one of our active trader services.  Brokers receive credits that apply toward their bonuses when the clients they refer are qualified by the Active Trader sales team and a successful placement results.  A successful placement is measured by an incremental increase in trading due to a client consolidating his trading at Schwab or otherwise using Schwab’s tools for traders. 

What are Other Sources of Compensation for Schwab’s Business Development Teams?
 

From time to time, business development teams may participate in short-term incentive plans, or STIPs.  STIPs are temporary incentives that usually focus on a class of products or services.  The goal of a STIP is typically to educate our representatives and raise their awareness about products and services and how they may serve our clients’ needs.  Generally, STIPs are based on the same criteria and principles as our incentive compensation plans discussed on this website.  

Brokers who demonstrate exceptional performance during the year may be eligible for additional rewards through Schwab’s Chairman’s Club.  Through this program, brokers who serve retail customers and distinguish themselves from their peers as measured by sales results plans can earn a trip to be held in the first quarter of the year.  In all cases, specific eligibility requirements must be met including time spent in a customer-facing role and performance management standards.

                                                                                                                                                                           [back to top]

Advice Teams

In General.  Our advice brokers and financial planners receive a salary and have the opportunity to earn a quarterly bonus.  Quarterly bonuses are calculated by using a credit system, which tracks points that brokers earn during the course of each quarter.  Advice team brokers earn points that count toward their bonus when they deliver advice consultations, when their clients bring new assets to Schwab, and when the brokers recommend non-portfolio products and services that their clients select to meet their financial needs.  When assigning points to each type of consultation, Schwab considers the economic value to Schwab, conflicts of interest principles, the time that it usually takes for a broker to explain the service, and the expected value to the client.   

To determine the quarterly bonus for advice brokers and financial planners, we consider the number of advice consultations that team members delivered to clients, corporate profitability, and the amount of assets that clients brought to Schwab on a national basis.  Individual bonuses are determined by the number of points earned by brokers for their advice consultations and sales efforts.  In addition, bonuses for brokers who provide Foundational consultations may be adjusted by management to account for client satisfaction, productivity, teamwork, and professional development. 

How Do Advice Team Brokers Earn Points That Count Towards Their Bonuses When I Purchase or Invest In…

- One-Time Advice Consultations
 

When our clients are in need of financial advice, our brokers work with them to determine their needs and provide the appropriate advice services.   Advice team brokers receive points which vary in amount based on the type of consultation that they provide. 

Brokers who provide advice consultations to clients earn more points when they deliver Comprehensive Portfolio Consultations than Foundational Consultations, due to the complexity and amount of time typically required to deliver the services.  For the same reasons, financial planners receive more points for providing Personal Financial Plans than they receive for Retirement Consultations, as Personal Financial Plans tend to be more complex and require more time to deliver.

At times, a broker who delivers Comprehensive Portfolio Consultations and/or Foundational Consultations will recommend that a client receive an advice consultation from a Schwab broker who is trained in a different specialty.  For example, a broker may refer a client to a financial planner for a Retirement Consultation or Personal Financial Plan.  When this occurs, the referring broker earns points for making the referral.  The number of points the broker earns is the same regardless of which service the broker refers the client to.  Our goal in providing this incentive is to encourage our brokers to direct clients to advice services

- Ongoing Advised Relationships
 

Advice team brokers often assist affluent clients by recommending one of the following Schwab services that includes an ongoing relationship and advice for an asset-based fee:  Schwab Private Client™, Schwab Advisor Network®, U.S. Trust®, and Schwab Advised Investing Signature™.  When a client selects one of these services, the broker who made the recommendation receives points.  Regardless of which option the client chooses, our brokers receive the same points when they refer clients to Schwab Private Client, Schwab Advisor Network, U.S. Trust, or Schwab Advised Investing Signature.  By paying the same incentives for all services of a similar type, we encourage our brokers to recommend the solution that is in the client’s best interests.  Brokers may receive additional points when they refer a client to one of these services if the client invests with dollars that are new to Schwab.

Other clients who are seeking an advised relationship may prefer to enroll in Schwab’s core advice package, Schwab Advised Investing Foundational™.  This service provides ongoing advice by a team of brokers for a flat annual fee.  When brokers enroll clients in this advice package, they receive a fixed number of credits.  The credits received for this advice package are lower than the credits given for referrals to Schwab Advised Investing Signature™, Schwab Private Client™, Schwab Advisor Network®, and U.S. Trust® because Schwab Advised Investing Foundational is a less complex advice service.   

On occasion, a broker and an enrolled client may determine that the client’s needs can best be met by a different type of advice service at Schwab.  For example, a client enrolled in Schwab Advised Investing Signature may decide that she prefers a team of brokers as opposed to a relationship with an individual advice broker.  Brokers who help clients to switch to a new service do not receive any additional points; however they do not lose any points either.  In this way, brokers may make referrals that are in their clients’ best interests without being concerned about the impact to their incentives. 

When a client who is enrolled in Schwab Advised Investing Foundational or Schwab Advised Investing Signature unenrolls and leaves Schwab, we subtract points from the brokers who serve them.  In this way, we encourage our brokers to appropriately maintain long-term relationships with their clients.

- Other Products and Services
 

Brokers on our advice teams also receive points when they help their clients select other products and services.  The amount of points that brokers can earn varies based on the type of product or service.  However, we do not pay our brokers differently for recommending Schwab’s own investment products or the products of other companies.

For clients who are in need of annuities, our brokers can assist in one of two ways.  Brokers who do not hold insurance licenses can refer clients to licensed Schwab brokers.  When these referrals result in completed applications, these brokers receive a fixed number of points.  The amount of points does not depend on the completion of the sale, nor are they based on the value of the annuity.  Furthermore, referring brokers receive points only when clients rollover existing annuities, and not when they purchase annuities with new assets.  Brokers who have insurance licenses can help clients purchase annuities directly.  They receive points when clients apply for the annuity, and alternatively may receive points when a purchase is made with assets that are new to Schwab.

For clients who are seeking term life insurance, our brokers can refer them to a third party provider for assistance.  In this situation, the referring broker receives a fixed number of points for each completed application.  As with annuities, the amount of points does not depend on the completion of the sale, nor are they based on the value of the life insurance policy. 

When our clients are in need of mortgages and home equity loans, our brokers can refer them to Schwab Bank for assistance.  Advice team brokers receive points that are applied towards their bonus when referrals result in accepted and committed loan applications. 

Advice team brokers can also help our clients to consolidate margin loans held at other financial institutions at Schwab.  When this happens, they receive points based on the dollar amount of any outstanding margin loans that are transferred to Schwab.  Our brokers are not compensated for any new margin debt that a customer chooses to incur.

- Active Trader 
 

Sometimes, brokers may refer clients who are actively trading at Schwab or another firm to the Active Trader sales team for enrollment in one of our active trader services.  Brokers receive points that apply toward their bonuses when the clients they refer are qualified by the Active Trader sales team and a successful placement results.  A successful placement is measured by an incremental increase in trading due to a client consolidating his trading at Schwab or otherwise using Schwab’s tools for traders.   

What Are Other Sources of Compensation for Advice Team Brokers?
 

From time to time, our advice teams may participate in short-term incentive plans, or STIPs.  STIPs are temporary incentives that usually focus on a class of products or services.  The goal of a STIP is typically to educate our representatives and raise their awareness about products and services and how they may serve our clients’ needs.  Generally, STIPs are based on the same criteria and principles as our incentive compensation plans discussed on this website.

Brokers on our advice teams who demonstrate exceptional performance during the year may be eligible for additional rewards through Schwab’s Chairman’s Club.  Through this program, brokers who distinguish themselves from their peers as measured by objective results tied to their incentive compensation plans can earn a trip to be held in the first quarter of the year or points that can be redeemed for merchandise.  In all cases, specific eligibility requirements must be met including time spent in a customer-facing role and performance management standards.   

[back to top]

Schwab Private Client™

In General.  At Schwab Private Client, our Private Client Consultants and other brokers who assist them are paid a salary and a bonus.  They do not receive commissions on any trades that their clients place.  The bonus that these brokers receive is based in part on the assets in clients’ accounts and their broader Schwab portfolio, which includes any financial services products such as 529 accounts and annuity exchanges.  One benefit of this incentive structure is that it rewards brokers for successfully helping clients to increase the value of their portfolio.

The bonus that brokers in our Private Client group receive is also based on asset retention, which is measured by each broker’s practice assets.  “Practice assets” are assets that each broker’s clients retain with Schwab Private Client, and are used to measure whether brokers are successfully maintaining long-term relationships with their clients as indicative of client satisfaction.

Private Client representatives also earn their bonuses when client assets are transferred into Schwab Private Client, and can receive higher bonuses when clients transfer assets that are new to Schwab.  In addition, they earn practice assets when they place clients in other ongoing relationships which involve advice for an asset-based fee, such as Schwab Advisor Network®, U.S. Trust^® and Schwab Advised Investing Signature™.

How Do Schwab Private Client Representatives Earn Credits That Count Towards Their Bonus When I Purchase or Invest In…

- Products and Services
 

Brokers at Schwab Private Client also receive incentive credits when they help our clients select products and services.  The amount of credits that brokers can receive varies based on the type of product or service.  However, we do not pay our brokers differently for recommending Schwab’s own investment products or the products of other companies.

For clients who are interested in annuities, our brokers can assist in one of two ways.  Brokers who do not hold insurance licenses can refer clients to licensed Schwab brokers, while brokers who have insurance licenses can help clients purchase annuities directly.  These brokers receive either a fixed number of credits or credits that are based on the value of the annuity, depending on the licensing status of the brokers on the Schwab Private Client team.

For clients who are seeking term life insurance, our brokers can refer them to a third party provider for assistance.  In this situation, the referring broker receives a fixed number of credits for each completed application.  The amount of credits does not depend on the completion of the sale, nor are they based on the value of the life insurance policy.

When clients are in need of mortgages and home equity loans, brokers within Schwab Private Client can refer them to Schwab Bank.  Brokers receive credit towards their bonus when those referrals turn into accepted and committed loan applications.  The amount of credits that brokers can receive is predetermined and depends on whether the mortgage is a standard, jumbo, or super-jumbo.  

- Schwab Advisor Network®, U. S. Trust®, and Schwab Advised Investing Signature™
 

Sometimes, clients who are invested through Schwab Private Client may decide that a different type of relationship-based service is better suited to their needs.  At Schwab, we want our brokers to recommend solutions that are in our clients’ best interests without being concerned about the impact on their own incentive compensation.  As a result, when a broker refers a client to Schwab Advisor Network, U.S. Trust, or Schwab Advised Investing Signature, we continue to provide our brokers with practice assets for a limited period of time.   For referrals from Schwab Private Client to Schwab Advisor Network or U.S. Trust, the referring Private Client broker will continue to receive practice assets for two years.  For referrals into Schwab Advised Investing Signature, the referring Private Client broker will continue to receive practice assets for six months. 

What Are Other Sources of Compensation for Schwab Private Client Representatives?
 

From time to time, Schwab Private Client representatives may participate in short-term incentive plans, or STIPs.  STIPs are temporary incentives that usually focus on a class of products or services.  The goal of a STIP is typically to educate our representatives and raise their awareness about products and services and how they may serve our clients’ needs.  Generally, STIPs are based on the same criteria and principles as our incentive compensation plans discussed on this website. 

Brokers who demonstrate exceptional performance during the year may be eligible for additional rewards through Schwab’s Chairman’s Club.  Through this program, brokers whose sales results distinguish themselves from their peers can earn a trip to be held in the first quarter of the year or points that can be redeemed for merchandise via a third party vendor website.  In all cases, specific eligibility requirements must be met including time spent in a client-facing role and performance management standards. 

Another reward that Schwab offers to Private Client Consultants is participation in President’s Club.  This program provides restricted stock to top performing brokers and managers in order to recognize exceptional performance for the year based on sales results.                                                                                                                                                                         [back to top]

Global Services

In General.  Global Services consists of several units which can be identified by the markets and clients which they serve:  Asia Pacific Services, Hong Kong, Latin America Center, United Kingdom, and Puerto Rico.  The incentive compensation programs reflect those different markets and the role of the brokers within those units.   

Brokers in Global Services receive a salary and may be eligible to receive a quarterly bonus.  Quarterly bonuses are calculated by using a credit system, which considers the amount of credits that each broker has earned during the quarter.  Our brokers earn credits when their clients bring new assets to Schwab, and when the brokers recommend services and products which their clients purchase to meet their financial needs.  To determine the amount of credits assigned to each service or product, Schwab considers the following factors:  the economic value to Schwab, conflicts of interest principles, the time that it typically takes a broker to explain the service, and the expected value for the client.

In addition to considering the credits that brokers earn for recommending products and services, bonuses are based on other factors described below, and vary depending on the role of the broker as well as the markets and clients which they serve.

- Sales
 

Bonuses for brokers who engage in sales for Asia Pacific Services, Hong Kong, the Latin America Center and the United Kingdom are determined in part by credits.  Brokers receive credits when their clients bring new assets to Schwab and retain assets at Schwab over time, as well as when brokers recommend products and services that their clients select to meet their financial needs.  The credit system is carefully designed so that it does not inappropriately influence our brokers’ recommendations toward specific products or services.  Brokers receive higher incentives when a client purchases products and services with assets that are new to Schwab, and additionally when those new assets are from foreign residents.

There are some differences in how sales personnel are compensated based on the Global Services market that they serve.  In addition to earning individual credits, Asia Pacific Services brokers in a sales function earn a portion of their bonuses by retaining select customers.  In Hong Kong, Latin America Center, United Kingdom, and Puerto Rico, brokers in a sales role can earn a portion of their bonuses through the performance of their branch and the overall performance of Schwab Global Services.  Finally, in Hong Kong, brokers can also earn credits toward their bonuses by recommending our active trader technology, StreetSmartPro®, to suitable clients for a fee.   

- Service
 

Schwab Global Services brokers who have a service role are eligible to receive incentives based on the following: performance of the units that the brokers support, retention of select Global Services clients, new client assets, successful referrals to products and services, and overall corporate performance.  These brokers earn higher incentives when a client invests assets that are new to Schwab, and additionally when those new assets are from foreign residents.   Individual bonuses are determined by taking into account productivity, business development, teamwork, quality, and service.  

- Advice
 

Advice representatives at Schwab Global Services receive a salary and have the opportunity to earn a bonus based on both team performance and their individual performance.  The funding of their team’s bonus is based on the number of advice conversions, the net new assets received as a result of the advice conversions, and the overall performance of Schwab Global Services.  Managers allocate the team’s bonus among its members by considering their contribution to the team results relative to their peers. 

- Private Client
 

In Schwab Global Services’ Private Client practice, Private Client Consultants and the brokers who support them are eligible to receive quarterly bonuses that are based on new assets that their clients bring to their Private Client accounts.  In addition, brokers in the Global Services Private Client practice also increase their incentives when their clients retain their assets at Schwab, which is measured by each broker’s practice assets.  “Practice assets” are assets that each broker’s clients retain with Schwab Private Client, and are used to measure whether brokers are successfully maintaining long-term relationships with their clients.   One benefit of this incentive is that it rewards our brokers for successfully helping clients to increase the value of their portfolio.

Private Client Consultants also receive credits when they successfully place clients into one of the following ongoing relationships which involve advice for an asset-based fee: Schwab Advisor Network®, U.S. Trust® and Schwab Advised Investing Signature™.  We pay the same incentive regardless of which relationship the client selects. In addition, when clients sometimes opt to switch from Schwab Private Client to one of the other ongoing advised relationship services, we continue to provide our brokers with practice assets for the remainder of the quarter.  By doing so, we encourage our brokers to recommend the solution that is in the client’s best interests without being concerned about the impact on their own incentive compensation.   

How Do Global Services Brokers Earn Credits Which Count Toward Their Bonuses When I Enroll in an Ongoing Advice Service?

Global Services brokers who serve our affluent clients in a sales, service, or advice role may recommend one of the following Schwab services that includes an ongoing relationship and advice for an asset-based fee:  Schwab Private Client™, Schwab Advisor Network®, U.S. Trust®, and Schwab Advised Investing Signature™.  When a client selects one of these services, the broker who made the recommendation receives credits that are equal to the dollar amount that the client invests.  Regardless of which option the client chooses, brokers receive the same, asset-based credits when they refer clients to Schwab Private Client, Schwab Advisor Network, U.S. Trust, or Schwab Advised Investing Signature.  By paying the same incentives for services of a similar type, we encourage our brokers to recommend the solution that is in the client’s best interests.