Schwab makes thousands of its RIAs subject to fee for robo-software, allocation of client cash to Schwab Bank

If a 6% minimum was the right constant cash percentage for a retail customer, why does Schwab have a 4% requirement for RIAs? Schwab says it is creating a minimum cash position to offset the expense of rebalancing and tax loss harvesting. Are institutional clients more expensive to rebalance than retail clients? These are automated processes that cost Schwab next to nothing.

Schwab calls cash one of the best defensive asset classes. That is true in a down market. That is not true in a rising market. Cash will be a drag on performance in positive markets. And, what are the odds more astute investors will be willing to pay fees to advisors on a fixed percentage of assets that reside in Schwab Bank. Advisors will be making less money before Schwab deducts 10 bps from the RIAs who have less than $100mm at Schwab.

How many revenue streams does Schwab want to derive from investors and advisors? This service is not investor or advisor friendly – too much spin, too many angles. But, since when did investors have to understand a product to buy it? The Schwab name and the word “free” may be enough to make the service a roaring success.