Custodian Comparison & FAQ
The following comparison table and Frequently Asked Questions are provided solely for informational purposes to assist you in choosing a custodian. You should also carefully review our Brochure (Form ADV Part 2A), which contains important additional information about these custodians, their services and potential conflicts of interest.
|Fees||Interactive Brokers||Charles Schwab|
|Stocks & ETFs||$0.005 for stocks and ETFs, capped at 1% of trade value||$0|
|Mutual Funds||Lesser of $14.95 or 3% of trade value, per transaction||$25 for mutual funds (electronic)|
|Options||$0.65 per option contract **||N/A *|
|Wires||1 free per month, then $10 per wire||$15 per wire|
|Margin Rates||Base rate of 1.59% + 0.3% to 1.5%, depending on debit balance||Base rate of 7.50% + 0.075% to 1.825%, depending on debit balance|
|* Options cannot be traded by advisors hosted on the Schwab platform, at this time.
** If premium is > $0.10 and volume is < $10,000
|Trading||Interactive Brokers||Charles Schwab|
|Hedged Equity Strategy||Yes||No|
|Service||Interactive Brokers||Charles Schwab|
|Customer Service||8AM – 8PM via Phone
|24/7 via Phone
|Security||2FA via IBKR Mobile or SMS||Optional 2FA via SMS, other verification practices included|
|Partial Roth Conversions||Not Permitted||Permitted|
|Dollar Cost Averaging||Permitted||Not Permitted|
1. What fees should I expect when moving my existing account from IB to Schwab?
IB does not charge any fees associated with transferring or closing your account. If we need to sell holdings in your IB account as part of the transfer, those sales would be subject to the normal transaction fees at IB.
Once your account is open at Schwab, there would be a fee of $50 if you subsequently decide to close your account there.
Most money movement at Schwab is free of charge, with the exception of wires out of your account ($25 per transfer; $15 if transferred online). A full schedule of fees can be found here.
2. In what ways will the investing and/or trading in my managed account be different at Schwab?
The most notable difference in how your account is managed at Schwab will be the lack of fractional share functionality that we currently have at IB. As a result, your account will only hold full shares of the stocks and ETF’s held in our Model Portfolios and may hold more cash than if you were to maintain your account at IB. As we describe in our Brochure, holding significant amounts of cash may be inconsistent with your account’s investment strategies and result in deviations from our Model Portfolios. In addition, our management fee will accrue and be payable with respect to cash balances held in your account.
Because we believe that, under normal market conditions, it is in your best interest to remain fully invested in our models, the portion of your holdings that were previously held in fractional shares will now be invested in ETFs that we believe offer comparable exposure to the desired asset class. Let’s review an example…
Let’s say you hold 1.25 shares of XYZ Corp in your account at IB and each share is priced at $1,000. When your account moves to Schwab, youwill retain the 1 full share of XYZ Corp and the excess $250 of value from the 0.25 share would be invested in a similarly positioned ETF.
At this time, Schwab’s trading platform does not support the trading of options or hedging strategies in advisor-managed accounts. Therefore, we are unable to support our Hedged Equity (HEQ) strategy at Schwab. We will monitor our ability to offer this option in the future.
3. How long will it take to move my account from IB to Schwab?
Your account will be moved in-kind via the ACATS process, which transfers the whole shares of equities in your account to your new account at Schwab. The ACATS process typically takes 3-5 days.
The fractional shares left in your account will be liquidated and transferred to your new account in cash automatically. This takes an additional 3-5 business days.
Once both transfers are complete, our traders will implement your trading plan.
4. Will my investment plan change if I move my account from IB to Schwab?
Unless you instruct us otherwise, we want to avoid making any changes to your account during the process of moving it, which is why you’ll be asked to review your allocations prior to the account transfer. As always, we strongly encourage you to periodically review your allocations and notify us of any changes with respect to your risk tolerance, needs or goals.
The first step of the transfer process is the receipt of a DocuSign packet for your e-signature. At the point of sending this packet, we will pause any updates to your account for the duration of the transfer.
When our traders implement your trading plan at Schwab, they will rebalance to your target allocation and catch your account up for any interim trade orders from our portfolio managers.
If you want to make a change to your account’s positioning, it would be best to speak with one of our Wealth Advisors before beginning the transfer process.
5. Will there be tax consequences of moving my account from IB to Schwab?
If you are moving a retirement account such as IRA, Roth IRA, SEP-IRA, or employer retirement plan to Schwab, there are no tax consequences as it will be treated as a trustee-to-trustee transfer.
If you are moving a taxable account such as Individual Brokerage, Joint Brokerage, Trust, or Custodial accounts, there will be capital gains/losses associated with the sale of fractional shares at IB, and potential sales of holdings upon rebalancing the account at Schwab.
6. What are some reasons I might want to leave my account as-is with Interactive Brokers?
- Fractional Shares. Interactive Brokers offers a highly efficient trading platform that facilitates trading in fractional shares. By investing in fractional shares we are able to more closely track the target investment plan.
- Margin Rates. We generally believe that margin loans are appropriate only for a small portion of our client base, but if you utilize a margin loan Interactive Brokers has some of the lowest margin rates available.
- Hedged Equity. If you are currently invested in our Hedged Equity strategy, we will not be able to move your Personal Portfolio to Schwab. Unfortunately, we are not able to implement our clients’ asset allocation across multiple custodians. Should you like to discuss this point further, please contact us to speak to an advisor.
- Resistant to Change. If you just like to let sleeping dogs lie, that’s fine too.
7. What are some reasons I might want to move my account to Schwab?
- Platform Familiarity. If you already have accounts at Schwab (such as other brokerage accounts or your employer retirement plan) you’ll be able to see your MFWM account under the same login.
- App-Supported Account Administration. Schwab offers a smartphone app (Schwab Alliance) to review your account information. The app also supports changes such as approving new accounts, updating email address, updating mailing address, and approving money movement via smartphone app.
- Commission-Free Trades for Stocks/ETF’s. Schwab does not charge commissions for electronic trades of stocks and ETF’s.
While we have thoroughly vetted Charles Schwab for inclusion as a custodian on our Personal Portfolio program, and we also may provide guidance (through our financial planners) regarding the differences in custodians, the choice regarding which custodian to select is ultimately our clients’ decision.