Schwab Termination ProceduresPresented by Airgead Clann LLC

1Why Charles Schwab is bad for business

Table of Contents

• Slide 3: Introduction• Slide 4: Executive Summary• Slide 5: “No-Cause Termination” Section of Contract• Slide 6: Contract Section About Respecting Adviser-Client

Relationship.• Slide 7: Letter to Client• Slide 8: Letter to Adviser• Slide 9: Comparative Analysis• Slide 10: Competitor Policies• Slide 11: Summary

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The financial world has been a place of rampant fear for the average client. They have dealt with market crashes as well as enormous scandals from the likes of Madoff, Stanford, and Corzine. We all know it is the responsibility of Independent Advisers to ensure client’s needs are met. Lately, however, it has become increasingly important for Advisers to protect the client from being unnecessarily fearful of what the media often reports.

Despite what the “Talk to Chuck” ads imply, Charles Schwab perpetuates the fear-mongering in their termination procedures. They have a history of terminating Advisers without cause and sending a damaging letter to every one of the Adviser’s clients. Most clients become fearful. Some clients become angry. Other clients distrust the Adviser and look elsewhere for their asset management.

• This presentation (link) walks you through the procedure.• For a copy of the Schwab-Adviser Agreement, click here• For a copy of Schwab’s Adviser Termination Letter, click here• For a copy of Schwab’s Letter to the Client, click here• For a comparative analysis of how Schwab’s competitors do business, click here.

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Schwab Termination ProceduresPresented by

Airgead Clann LLCIntroduction

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On behalf of the entire investment community, we have compiled the following information to demonstrate how Charles Schwab has deliberately damaged Independent Advisers and invoked fear into the clients they intend to serve. Schwab not only violates the Adviser-Client relationship, they do so in such a demonstrative manner as to permanently scar the Adviser and the Client. Additionally, based on numerous phone conversations and documentation review, Schwab appears to be the only Custodian to act in this manner.It is our intention to disseminate this information to any and all Investment Advisers and Registered Reps. We also intend to receive feedback via our website (www.airgeadclann.net/chuck.html) from those who would like to share similar experiences.

Schwab Termination Procedure Summary:

• Schwab makes the decision to terminate an independent advisor.• Schwab calls the advisor and follows up with a letter.• Schwab does not disclose to the advisor the reason for the action.• Schwab announces that the decision is irrevocable, not subject to discussion, and FINAL.• Schwab simultaneously sends a letter to every single client announcing the termination.• The content, timing, clients selected and language of the client letter is determined solely by

Schwab and not subject to advisor approval or even input.• This entire process occurs on the same day….Simultaneously.  

Schwab Termination ProceduresPresented by

Airgead Clann LLCExecutive Summary

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Schwab Termination ProceduresPresented by

Airgead Clann LLC

o As you can see, both parties agree to no-cause termination

o However, nowhere in the contract do they describe that procedure

No Cause Termination

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Schwab Termination ProceduresPresented by

Airgead Clann LLC

o No-cause termination is the industry standard, but this section of the contract is vitally important to the Adviser.

o Schwab clearly violates this section by sending each client a letter.

Contract Section About Respecting Adviser-Client Relationship

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Schwab Termination ProceduresPresented by

Airgead Clann LLCLetter to Client

o Place yourself in the shoes of a client who has seen nothing but headlines of financial turmoil.

o The client is not provided any reason for this action.

o The letter includes a lot of info that they will not understand, confusing and angering the client.

o The client rarely received communication from Schwab prior to this, which leaves them suspicious and fearful.

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Schwab Termination ProceduresPresented by

Airgead Clann LLCLetter to Adviser

o Schwab gives no reason for the termination decision.

o Schwab gives 10 weeks to transfer all business out.

o They make it clear they will be communicating with your clients.

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Schwab Termination ProceduresPresented by

Airgead Clann LLCComparative Analysis

• We obtained similar counts of treatment by Schwab to other Advisers in the past. • We obtained a copy of the letter TD Ameritrade sent to a terminated Adviser. NO letter was

sent to clients.• Every company on the list above sends a letter to the IA upon termination.• Schwab is the ONLY company to simultaneously send a letter to the IA and the clients upon

termination.

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Schwab Termination ProceduresPresented by

Airgead Clann LLCCompetitors Policies

Fidelity: 90 days notice unless a fraud requires immediate action. As an example, when Custodians stopped housing alternative assets, Fidelity worked with their Advisers while Schwab

sent out termination letters to Advisers AND Clients.

TD Ameritrade issues a letter to the Adviser and sets up a phone call. In one case of alleged forgery against the Adviser, TD Ameritrade did not contact the clients.

LPL will notify the Adviser, but not the clients. In one termination where the Adviser forged documents and reimbursed clients with personal money, no letter was sent to the clients.

A Scottrade representative said they never send a letter to the clients upon termination.

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Schwab Termination ProceduresPresented by

Airgead Clann LLCSummary

• Schwab can terminate an IA at any time, without cause• Schwab will send a letter to every client you have, damaging your

relationships.• Schwab clearly violates the Client-Adviser communication clause in

their contract. • Schwab has a history of terminating Advisers in this manner.• Schwab is the only Custodian we have found that operates in this

manner.