Investment professionals' compensation

Since Charles Schwab & Co., Inc. ("Schwab") was founded more than 40 years ago, we've been committed to serving the needs of individual investors. One of our most important beliefs is that you should understand how the financial professionals assisting you are paid, so you can evaluate the recommendations you receive.

On these pages, we identify the different categories of investment professionals who may serve you at Schwab and describe how they are compensated. This includes both Schwab employees and independent branch franchisees (and their employees) operating Schwab Independent Branches. Compensation for investment professionals who provide recommendations is designed to support the provision of advice in the client's best interest.

Please note that the information below describes how Schwab pays employee professionals and shares revenue with Independent Branch professionals, not how you pay Schwab for the services you receive. Information about what you pay Schwab for the services we provide can be found at schwab.com/pricing.

These pages summarize our compensation plans and incorporate all recent changes in effect as of January 1, 2023, including changes to how we pay Schwab Financial Consultants.

These pages are accurate as of the date indicated above. The most recent information is available at schwab.com/compensationdisclosure.

We invite you to read this information carefully and to contact us at 800-435-4000 if you have any questions. (For multilingual services, call 800-662-6068. For services outside the U.S., call +1-415-667-8400.)

If you have questions about information contained in this section, please call 800-435-4000. For media inquiries, please call the Schwab Corporate Public Relations hotline at 415-667-9500.

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Please note that the information in this section does not apply to Schwab accounts managed by an independent investment advisor. Independent investment advisors are not owned by, affiliated with, or supervised by Charles Schwab & Co., Inc. ("Schwab").

Trader Sales Representatives identify trading clients who can benefit from Schwab's trading tools and education. They do not provide trading advice. The group consists of regionally based Regional Investment Strategists who work with local branches, as well as phone-based Trading Consultants and Education Specialists.

Fixed Income Specialists serve clients with fixed income investing needs. The group consists of Regional Bond Specialists and Bond Investment Specialists. Neither group earns commissions on transactions. Nor does it matter whether a transaction is executed as agent, as a riskless principal, or from Schwab's own inventory.

Schwab Independent Branch Leaders (IBLs) are franchisees who operate Schwab Independent Branches pursuant to a franchise agreement with Schwab. IBLs may employ IB representatives (Financial Consultants, Associate Financial Consultants, and Client Service Specialists, who may or may not be registered).

IB registered personnel are not Schwab employees, but they are registered representatives of Schwab for purposes of securities regulations. IBLs receive a portion of the revenue generated by the activities and assets in accounts of Schwab clients assigned to their independent branches. IB representatives also may share in the revenue earned by their IBL employer. Schwab notifies clients when they are assigned to an Independent Branch.

Payout

IBLs are not paid commissions for the sale of any specific product or service, nor does Schwab pay them a salary or the incentive compensation earned by representatives who are employed by Schwab. Instead, they earn revenue from their business, the overall amount of which is based on the revenue Schwab earns from clients whose accounts are assigned to their independent branch, and revenue for insurance and financial plans as described below.

For purposes of revenue earned by the IBLs, the assets in accounts assigned to them are divided into two categories. As with employee representatives, the difference in average rates between these two categories is based on the time and expertise necessary to recommend and service different products and programs and the inherent complexity and variety attributable to such products and services. Because IBLs are franchisees rather than employees, and because they are therefore expected and encouraged to have more individual control of the management of their time, only two rates are applied to the assets assigned to them, rather than the three rates applied to assets in Financial Consultant Practices.

• Advised Assets—Assets in accounts enrolled in Schwab Wealth Advisory™, Schwab Managed Portfolios™, Schwab Managed Account Select^®, Schwab Managed Account Connection^® (discretionary wrap-fee programs that include ThomasPartners^® Strategies, Windhaven® Strategies, and Wasmer Schroeder™ Strategies), Schwab Intelligent Portfolios^®, Schwab Intelligent Portfolios Premium™, USAA Managed Portfolios^®, or accounts managed by an independent third-party investment advisor to whom the client was referred through the Schwab Advisor Network^® service, or assets invested in a registered annuity; and
• Non-Advised Assets—Assets not in the Advised Asset category, which include stocks, bonds, mutual funds, and ETFs, as well as payment for providing cash management services.

Each month, Schwab calculates and applies an Advised Asset Average Rate and a Non-Advised Asset Average Rate to the assets in accounts assigned to all Schwab Independent Branches.

The rates are calculated by looking at 12-month trailing assets and revenue from all Schwab Independent Branch accounts.

Schwab applies these Average Rates to the daily average assets in each category in accounts assigned to individual Schwab Independent Branches. The Average Rates change monthly, but the Advised Asset Average Rates are higher based on the factors noted above. An IBL, therefore, earns more money when recommending that a client enroll or open an account in one of the services in the Advised Asset category.

Schwab also calculates the actual revenue earned by Schwab (often one-time but in some cases recurring) from sales of Immediate and Fixed Deferred Annuities, Long-Term Care Insurance, Permanent Life Insurance, Disability Insurance, and Term Life Insurance (collectively, "Insurance Products"). Additionally, IBLs may refer clients to the Schwab Plan Comprehensive or Personal Financial Plan (collectively, "Fee-Based Financial Plans").

After adding together the figures for Advised Assets and Non-Advised Assets, Schwab applies a multiplier based on the tenure of the IBL and type of client. In years one through five, the IBL's payout share is adjusted using a multiplier ranging from 185% to 55%, and then, in years six and beyond, the payout share is adjusted using a 50% multiplier. Then revenue from insurance products and fee-based financial plans, adjusted using the 50% multiplier in all years, are added to the Advised and Non-Advised amounts. (Note: For assets of clients who transition to Schwab from an IBL's prior firm, the IBL may elect a constant multiplier of 50% in exchange for an increased ability to ask such clients to transition away from Schwab if the franchise agreement ends.)

Finally, Schwab deducts certain monthly fees and expenses from the total adjusted revenue amount that the IBL owes to Schwab under the franchise agreement. This results in a net payout for the month.

Compensation

IB Representatives are employees of the IBL. They receive a salary paid by the IBL and, as determined by the IBL as their employer, may be eligible for a bonus.

The criteria used to determine the amount of the bonus may include such factors as Net New Assets, Branch Assets and Client Promoter Score. These criteria do not include recommendations of any specific product, offer, or service.