Charles Schwab Cash Sweep  – Class Action Investigation

CSK&D is investigating a potential class action lawsuit against Charles Schwab Investment Advisory, Inc. for alleged self-dealing through its “no-fee” robo-advisor program for clients who are invested in Schwab Intelligent Portfolios (“SIP”). Specifically, each SIP features a “cash sweep” program whereby, instead of charging an advisory fee, Schwab’s robo earns undeclared fees by sweeping the cash allocation of client managed accounts into Schwab Bank and earning a net interest margin on this cash. This cash sweep program incentivized Schwab’s robo-advisors to imprudently hold client’s assets in high cash allocations. A recent report indicates that clients with an SIP missed out on an estimated $531 million in portfolio growth than if Schwab had just charged a 0.30% management fee and invested the cash into the same fixed-income assets that are held in the portfolio. The report follows an announcement in July that the Securities and Exchange Commission is probing Schwab’s robo-advisor platform concerning disclosure issues.

If you have an Intelligent Portfolios account with Schwab through its SIP Program, please contact the attorneys below.

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Attorneys for this case:

Benjamin F. Johns
Beena M. McDonald
Samantha E. Holbrook