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Schwab phones (at least some) Private Client customers to advise dumping PIMCO Total Return fund

Funds under Schwab discretion exited the Bill Gross fund three weeks ago

Tuesday, October 21, 2014 – 12:07 AM by Brooke Southall
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'Chuck' is advising a move to lower-expense ratio funds and stable management teams.

Brooke’s Note: It’s a conclusion UBS reached a while ago. Schwab appears to be almost fully there now. Mess not with the PIMCO Total Return fund. Where’s the upside? See: The real Bill Gross story with big help from the Wall Street Journal’s reporting. And Schwab can be commended for the funds that clients are getting in place of PIMCO Total Return all having lower expense ratios.

Charles Schwab & Co. is advising Schwab Private Client customers to move their assets out of the PIMCO Total Return fund.

The San Francisco-based RIA, which manages $58 billion in 142,000 accounts, has reached out to customers by telephone with the suggestion to yank all assets in the fund formerly managed by Bill Gross and move them to lower-expense ratio funds with stable management teams.

Customers told RIABiz that they were advised that all Private Client customers were getting the same instructions.

Schwab spokeswoman Anita Fox says that is “inaccurate.”

“In Schwab Private Client, we have individual interactions with clients about their unique circumstances,” she explained.

Approval sought

Schwab manages these SPC RIA assets on a non-discretionary basis so its advisors are seeking client approval to move the assets with these phone calls. See: Starting 2012 with a bang, Schwab will place its private client business under a new RIA.

The suggestion from the wealth management arm of Schwab comes a little more than three weeks after the Sept. 26 departure of Bill Gross as manager of that fund.

It comes more than six months after Schwab removed the fund from its Select List in April 2014. On its website, Schwab writes: “Schwab’s proprietary mutual fund evaluation fell relative to other options in the intermediate term bond category. Removal from the Select List is not equivalent to a sell recommendation; it only means that we no longer consider the fund to be as attractive an option relative to other alternatives.”

The move also comes a few weeks after Schwab’s portfolio managers pulled assets from PIMCO Total Return that were held in funds under their discretion, like ones managed by Charles Schwab Investment Management, which is essentially its money market and mutual fund arm.

Staggered timing

On Sept. 30, Charles Schwab Investment Advisory, the Schwab affiliate that manages Schwab Managed Portfolios sold all of its holdings of the PIMCO Total Return fund.

The staggered timing of the moves reflects different decision-making entities and methodologies, according to Fox.

“Schwab Private Client Investment Advisory is an RIA managed independently from CSIM, which makes decisions about the management of its funds according to its own processes and assessments, and CSIA manages the Select List, also separately,” she writes in an e-mail. “For the latter, the Select List is re-constituted quarterly using a largely quant process.”

Recommended substitutions

When the Sept. 30 liquidation by CSIA occurred, Schwab wrote:

“Although PIMCO has a deep bench of investment professionals and the firm has named Gross’ successor on the Total Return fund, it is unclear what, if any, changes will be made to the portfolio management philosophy of the fund. Since Total Return is a widely held fund with a fund manager in the public eye, CSIA also was concerned about the potential impact of accelerated redemptions on fund performance.” See: The very good news that RIAs can take away from the whole Bill Gross imbroglio.

Charles Schwab Bank Collective Trust Funds Investment Committee elected to remove Newport Beach, Calif.-based PIMCO as a sub-advisor to the Schwab Institutional Core-Plus Fixed Income Trust Fund and underlying investment for the Schwab Managed Retirement Trust Funds. “Liquidation of the strategy began Tuesday, September 30,” Schwab’s website says.

In place of the Total Return fund, Schwab suggests acquiring Baird Core Plus Bond Institutional, Metropolitan West Total Return Bond and Vanguard Intermediate-Term Investment-Grade funds.


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August 10, 2021 – 11:46 PM



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