Getting started with Institutional Intelligent Portfolios

Transcription

1 Getting started with Institutional Intelligent Portfolios Welcome to Institutional Intelligent Portfolios, an automated investment management platform provided by Schwab Performance Technologies (SPT) and developed exclusively for advisors who custody with Schwab. Institutional Intelligent Portfolios enables you to combine your personalized wealth management philosophy and investment expertise with the power of an automated investment management solution. By automating many aspects of investment and client management, Institutional Intelligent Portfolios can enhance your firm s efficiency and open new opportunities. This guide is designed to help you understand and think through your program setup by: Introducing you to the advisor console, your web-based application for setting up and managing your program Helping you and your firm become more familiar with the platform, your options for customization of asset classes, and exchange-traded funds (s) Providing an overview of the key decisions you ll need to make Outlining best practices and resources The guide will touch on several features or options, such as tax-loss harvesting and rebalancing. Should you need more detailed information on any of the concepts discussed in this guide, please review Institutional Intelligent Portfolios : How to Build and Manage Your Customized Portfolios, or review the information on the website. Getting you up and running quickly With just a few simple steps, the advisor console allows you to build a suite of portfolios based on your firm s investment philosophy. You ll also be able to customize your clients online experience with your own branding. 1. Choose your investment strategies and account features. 2. Build your portfolios. 3. Brand your client portal with your logo and contact information. 1. Choose your investment strategies and account features. 2. Build your portfolios. 3. Brand your client portal with your logo and contact information. Getting started with Institutional Intelligent Portfolios 1

2 1 Choose your investment strategies and account features. The first step of the account set-up process is to select the types of investment strategies and account features that you wish to offer your clients. The portfolio strategies include four potential investment strategies: 1. (required) Each strategy represents a suite of portfolios across the risk spectrum, from conservative to aggressive. The strategy with taxable bonds is required and allows you to create 3 to 12 portfolios. You have the option to include as many of the other three strategies as you wish. strategies are designed to invest in asset classes that have historically delivered both growth and income, while strategies emphasize asset classes that have historically generated higher levels of income. Both and strategies have options for taxable bonds or municipal bonds. There are also two account features, including the option to offer: Automated tax-loss harvesting for clients with account balances of at least $50,000 Strategies that include California municipal bonds te that these strategies and account features will apply to all clients, as you are not able to customize these features at the individual client level. Investment strategies Definition Include? Seek to optimize gains from investing into assets that can experience capital appreciation and generate income over time. These portfolios are ideal for investors wanting to reinvest distributions and accumulate capital over longer periods of time. Required Do you want to supplement your program with portfolios that can invest a significant percentage into municipal bonds, which may have favorable federal tax implications? Seek to optimize gains from investing into assets that can experience capital appreciation and generate income over time, while also considering the impact of taxes on investor returns. Do you want to supplement your program with additional income-oriented strategies that use taxable bonds? Seek to optimize current income from investing into equities and bonds with attractive dividends and interest. Do you want to offer portfolios with income-oriented strategies that can invest a significant percentage of the fixed income securities into municipal bonds? Seek high current income from investing into equities and bonds with attractive dividends and interest, while considering the impact of taxes on investor returns. A significant portion of the fixed income securities can consist of municipal bonds that may have favorable federal tax implications. There are risks associated with the long-term core strategic holdings for each of the investment strategies. The more aggressive the investment strategy selected, the more likely the portfolio will contain larger weights in riskier asset classes, such as equities. Please note that you are solely responsible for determining both the s and percentage allocations for your chosen strategies. Schwab (or any affiliates) are not responsible for the performance of the portfolios you choose to implement for your clients. Getting started with Institutional Intelligent Portfolios 2

3 Account features Include? California Do you have many clients residing in California who are looking for incomeoriented strategies? Select whether to include California municipal bonds for your California clients. (This button will be turned off if you choose not to offer the municipal strategies above.) Tax-Loss Harvesting Do you want to offer your clients the ability to enroll in automated tax-loss harvesting if they have an account balance of at least $50,000? 2 Step 2: Build your portfolios. In order to build your portfolios, you will begin by selecting your desired asset classes and s. You have broad flexibility at this stage to select the s and asset classes that you believe best reflect your investment philosophy. Institutional Intelligent Portfolios provides two options for selecting asset classes and s: Standard Portfolio Customization and Enhanced Portfolio Customization. Both allow advisors to select which asset classes will be offered, choose s for those classes, and set allocations for the portfolios. Enhanced Portfolio Customization provides a higher level of flexibility for the advisor seeking to: 1) define their own asset classes, 2) determine which strategies that each asset class will apply, or 3) have a larger pool of s from which to choose. For more information about the two customization methods, please see the white paper Institutional Intelligent Portfolios : How to Build and Manage Your Customized Portfolios. Once you have determined which customization option is best for you, use the applicable table below to help in constructing your portfolios. The list of available s can be downloaded from the asset class and selection page in the Advisor Console. For more information about the evaluation process, please see the white paper Institutional Intelligent Portfolios : Evaluation. Standard portfolio customization a. Choose which asset classes you want to make available. b. Choose a primary and secondary for each asset class. Shaded areas can be customized. Include in Portfolio * Primary Secondary STOCKS Check indicates availability in strategy. US Large Company Stocks US Small Company Stocks US Large Company Stocks Fundamental US Small Company Stocks Fundamental International Developed Large Co Stocks International Developed Small Co Stocks International Developed Large Co Stocks Fundamental International Developed Small Co Stocks Fundamental International Emerging Market Stocks * A description of each asset class can be found in the white paper Institutional Intelligent Portfolios : Guide to es. Getting started with Institutional Intelligent Portfolios 3

4 Shaded areas can be customized. Include in Portfolio * Primary Secondary STOCKS (continued) Check indicates availability in strategy. International Emerging Market Stocks Fundamental US Exchange Traded REITs International Exchange Traded REITs US High Dividend Stocks International High Dividend Stocks Master Limited Partnerships FIXED INCOME Check indicates availability in strategy. US Treasuries US Investment Grade Corporate Bonds US Securitized Bonds US Inflation Protected Bonds International Developed Country Bonds US Corporate High Yield Bonds International Emerging Markets Bonds Investment Grade Bonds Investment Grade Bonds CA Preferred Securities Bank Loans US Short Term Treasuries COMMODITIES Check indicates availability in strategy. Gold and Other Precious Metals CASH Check indicates availability in strategy. Charles Schwab Bank Sweep REQUIRED * A description of each asset class can be found in the white paper Institutional Intelligent Portfolios : Guide to es. The cash allocation in Institutional Intelligent Portfolios is invested in the Schwab Intelligent Portfolios Sweep Program ( Sweep Program ), a program sponsored by Schwab. By enrolling in Institutional Intelligent Portfolios, you and your clients consent to having the free credit balances in client portfolios swept to deposit accounts at Charles Schwab Bank through the Sweep Program. Schwab Bank is an FDIC-insured depository institution affiliated with SPT and Schwab. Cash balances held in the Sweep Program at Schwab Bank are eligible for FDIC insurance up to allowable limits. These deposit accounts will earn a market rate of interest for highly liquid cash investments, which is currently determined by reference to a survey of the average national money market deposit account rate for retail deposits conducted by RateWatch. The current rate and RateWatch s methodology can be found at For more information about the Schwab Bank Sweep Program, see Schwab Intelligent Portfolios Sweep Program Disclosure Statement, January Getting started with Institutional Intelligent Portfolios 4

5 Enhanced Portfolio Customization a. Define the asset classes. Advisors can define up to 20 stock and 20 fixed income asset classes and up to 5 commodities asset classes. Advisors can use the predefined categories already provided or make changes to reflect their own investment philosophy. b. Create the asset class descriptions. These descriptions will be visible to your clients. c. Determine the strategies to which each asset class will be applied. d. Choose a primary and secondary for each asset class. Include in Portfolio STOCKS Shaded areas can be customized. Description Primary Secondary Place a checkmark in the column if you would like to include this asset in each strategy. Getting started with Institutional Intelligent Portfolios 5

6 Shaded areas can be customized. Include in Portfolio FIXED INCOME Description Primary Secondary Place a checkmark in the column if you would like to include this asset in each strategy. Getting started with Institutional Intelligent Portfolios 6

7 Shaded areas can be customized. Include in Portfolio COMMODITIES Description Primary Secondary Place a checkmark in the column if you would like to include this asset in each strategy. CASH Place a checkmark in the column if you would like to include this asset in each strategy. Charles Schwab Bank* Sweep REQUIRED Important note: Even if you choose not to offer tax-loss harvesting, you must select Primary and Secondary s within each asset class that do not track the same underlying index. Secondary s may be used in any portfolio for a number of situations, including but not limited to avoiding wash sales, minimizing trading of transferred assets, share price considerations, or honoring exclusions selected by your client. Getting started with Institutional Intelligent Portfolios 7

8 Even if you choose not to offer tax-loss harvesting, you must still elect a secondary option within each asset class. Secondary s may be used in any portfolio for a number of situations, including but not limited to avoiding wash sales, minimizing trading of transferred assets, share-price considerations, or honoring exclusions selected by your client. Your clients have the ability to exclude up to three s from their portfolio. Once you ve selected your asset classes and s, the next step is to modify the portfolio allocations for each asset class across the risk spectrum. Institutional Intelligent Portfolios is designed to offer a range of risk profiles across the spectrum, from more conservative to more aggressive, for each investment strategy that you select. To help achieve this distribution of portfolios across the risk spectrum, a few portfolio construction parameters, in the form of weighting limits on certain asset classes, are included as part of the asset allocation process. These parameters are described in our white paper Institutional Intelligent Portfolios : How to Build and Manage Your Customized Portfolios. For more information on how your clients will be mapped to each portfolio across the risk spectrum based on their answers to the Risk Profile Questionnaire, please review Institutional Intelligent Portfolios : Investor Profile Questionnaire Risk Scoring and Mapping. The cash allocation in Institutional Intelligent Portfolios is invested in the Schwab Intelligent Portfolios Sweep Program ( Sweep Program ), a program sponsored by Schwab. By enrolling in Institutional Intelligent Portfolios, you and your clients consent to having the free credit balances in client portfolios swept to deposit accounts at Charles Schwab Bank through the Sweep Program. Schwab Bank is an FDIC-insured depository institution affiliated with SPT and Schwab. Cash balances held in the Sweep Program at Schwab Bank are eligible for FDIC insurance up to allowable limits. These deposit accounts will earn a market rate of interest for highly liquid cash investments, which is currently determined by reference to a survey of the average national money market deposit account rate for retail deposits conducted by RateWatch. The current rate and RateWatch s methodology can be found at For more information about the Schwab Bank Sweep Program, see Schwab Intelligent Portfolios Sweep Program Disclosure Statement, January Getting started with Institutional Intelligent Portfolios 8

9 Below are two simple examples to demonstrate how the weightings work. Example One shows a populated suite of portfolios for the strategy, which includes 12 potential portfolios across the risk spectrum. Weightings for all asset classes within all 12 portfolios, P1 through P12, must be populated. To offer fewer than 12 unique portfolios, simply use identical weightings across a range of portfolios as seen in Example Two. Example Two shows a populated suite with six available portfolios. Example One 12 unique portfolios Example Two 6 unique portfolios, each duplicated once Getting started with Institutional Intelligent Portfolios 9

10 Overview 3 Brand your client portal with your logo Accounts Settings and contact information. FIRM SETTINGS FIRM IDENTITY Client Portal Portfolio Strategies Mobile App Branding & Identity Your last step is to customize your client s online experience to reflect your firm s brand and information. First, upload your firm s logo into the console. To ensure your logo appears correctly in both the mobile app as well as the web view, you will need a 309px X 150px high-resolution image of your logo in either a JPEG, PNG, or GIF file format. Next, you can select from nine different color schemes to find the color palette that aligns best to your firm s brand. Here is an image of the advisor console demonstrating the customization process. COLOR THEME CONTACT INFORMATION Firm Name Studebaker Financial Street Address 555 Main Street Street Address 2 City Anytown Sample portfolio State CA Zip Advisor console Blue color scheme Alternate color schemes Getting started with Institutional Intelligent Portfolios 10

11 Next steps If you have already signed and returned your License and Services Agreement and Enrollment forms, you will receive an with your Institutional Intelligent Portfolios instructions for first-time login. If you do not receive this within five business days, please let us know by ing or calling If you are still evaluating Institutional Intelligent Portfolios, please visit institutionalintelligent.schwab.com/advisor and click Get Started to find additional resources. Brokerage Products: t FDIC-Insured Bank Guarantee May Lose Value *For tax-loss harvesting and exemptions. Even if you choose not to offer tax-loss harvesting, you must still elect a secondary option within each asset class. Secondary s may be used in any portfolio for a number of situations, including but not limited to avoiding wash sales, minimizing trading of transferred assets, share-price considerations, or honoring exclusions selected by your client. Tax-loss harvesting is available for clients with invested assets of $50,000 or more in their Institutional Intelligent Portfolios account. Clients must be enrolled to receive this service. Cash balances held in the Sweep Program at Schwab Bank are eligible for FDIC insurance up to allowable limits. Institutional Intelligent Portfolios ( IIP ) is a technology and service platform made available by SPT to independent investment advisors ( Advisors ) who maintain a business relationship with Schwab Advisor Services, a division of Charles Schwab & Co., Inc. ( Schwab ). IIP is used by Advisors to provide their clients with an automated investment management service. Schwab, a registered broker-dealer and member SIPC, provides custody, trading, and support services. Brokerage products, including the Schwab One brokerage account, are offered by Schwab. SPT and Schwab are separate companies affiliated as subsidiaries of The Charles Schwab Corporation, but their products and services are independent from each other. CS&Co., SPT, and Charles Schwab Bank (together Schwab ) are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Member SIPC. Deposit and lending products are offered by Charles Schwab Bank, Member FDIC and an Equal Housing Lender. Schwab Advisor Services serves independent investment advisors and includes the custody, trading, and support services of Charles Schwab & Co., Inc. Member SIPC. This material is for registered investment advisor use only. This material may not be forwarded or made available, in part or in whole, to any party that is not a financial professional Schwab Performance Technologies. All rights reserved. AHA (0118-7U7R) (12/17)