Schwab Intelligent Portfolios™ Disclosure Brochure

Investing has changed forever. Introducing Schwab Intelligent Portfolios™. Charles Schwab Intelligent Portfolios is a fully automated investment advisory service that can make you rethink how you invest.
About Jack Berlin

About Schwab Intelligent Portfolios - About Prizm Share
Schwab program Client Account invest ETF
About Jack Berlin

About Schwab Intelligent Portfolios - About Prizm Share
Schwab program Client Account invest ETF
The following disclosure documents are provided for Schwab Intelligent Portfolios:
• Charles Schwab & Co., Inc. Schwab Intelligent Portfolios
Disclosure Brochure
• Charles Schwab Investment Advisory, Inc. Disclosure Brochure for
Schwab Intelligent Portfolios
Charles Schwab & Co., Inc. 
211 Main Street 
San Francisco, CA 94105 
Tel: (855) 694-5208 
intelligent.schwab.com
Schwab Intelligent Portfolios®
©2017 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. CC1153059 REG85976-02 (06/17) 
00194450
BDL100049-02
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November 30, 2018 
 
Charles Schwab & Co., Inc. Schwab Intelligent Portfolios® Disclosure Brochure 
 
 
 
 
 
 
 
 
 
Charles Schwab & Co., Inc. 
211 Main Street 
San Francisco, CA 94105  
Tel: (855) 694-5208 
intelligent.schwab.com 
 
 
 
 
This wrap fee program brochure provides information about the qualifications and business practices of Charles 
Schwab & Co., Inc. (“Schwab”). If you have any questions about the contents of this brochure, please contact us 
at the phone number above. The information in this brochure has not been approved or verified by the United 
States Securities and Exchange Commission or by any state securities authority. Schwab’s description of itself in 
this brochure as a registered investment advisor does not imply a certain level of skill or training on the part of 
Schwab or its representatives. Additional information about Schwab is also available on the SEC’s website at 
www.adviserinfo.sec.gov. 
 
 
 
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Contents 
Advisory Business ...................................................................................................................................................................... 3 
Services, Fees and Compensation.............................................................................................................................................. 3 
Services ................................................................................................................................................................................. 3 
Investment Strategies ...................................................................................................................................................... 4 
Selection of ETFs .............................................................................................................................................................. 5 
Rebalancing ...................................................................................................................................................................... 5 
Tax-Loss Harvesting .......................................................................................................................................................... 5 
Schwab Intelligent Portfolios® Sweep Program ............................................................................................................... 6 
Fees and Compensation ........................................................................................................................................................ 8 
Compensation to Other Schwab Investment Professionals ............................................................................................. 9 
Performance-Based Fees .................................................................................................................................................. 9 
Side-by-Side Management ............................................................................................................................................... 9 
Benefits to Schwab Affiliates ................................................................................................................................................ 9 
Conflicts of Interest and How They Are Addressed ............................................................................................................ 10 
Account Requirements and Types of Clients ........................................................................................................................... 11 
Retirement Accounts ...................................................................................................................................................... 12 
Portfolio Manager Selection and Evaluation ........................................................................................................................... 12 
Client Information Provided to Portfolio Manager ............................................................................................................. 12 
Client Contact With Portfolio Manager .............................................................................................................................. 12 
Additional Information ............................................................................................................................................................ 12 
Risks ......................................................................................................................................................................................... 12 
Disciplinary Information .......................................................................................................................................................... 13 
Other Financial Industry Activities and Affiliations .................................................................................................................. 15 
Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading ........................................................... 16 
Code of Ethics ..................................................................................................................................................................... 16 
Participation or Interest in Client Transactions .................................................................................................................. 16 
Order Routing and Trade Execution ............................................................................................................................... 16 
ETFs ................................................................................................................................................................................ 17 
Personal Trading ................................................................................................................................................................. 17 
Brokerage Practices ............................................................................................................................................................ 18 
Review of Accounts ............................................................................................................................................................. 18 
Client Referrals and Other Compensation ............................................................................................................................... 18 
Custody .................................................................................................................................................................................... 18 
Investment Discretion.............................................................................................................................................................. 18 
Voting Client Securities ............................................................................................................................................................ 18 
Financial Information ............................................................................................................................................................... 18 
 
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Advisory Business 
Schwab Intelligent Portfolios® is an online investment advisory program (the “SIP Program” or the “Program”) 
sponsored by Charles Schwab & Co., Inc. (“Schwab” or “we”). Schwab has been registered as an investment 
adviser under the Investment Advisers Act of 1940, as amended, since July 24, 1987. 
 
Schwab is also a wholly owned subsidiary of The Charles Schwab Corporation (“CSCorp”), a Delaware 
corporation that is publicly traded and listed on the New York Stock Exchange (symbol: SCHW). The Program is 
available exclusively to clients who open or maintain brokerage accounts at Schwab. Schwab began serving as 
the Program sponsor on March 30, 2018. Previously, Schwab affiliate Schwab Wealth Investment Advisory, Inc. 
(“SWIA”), another wholly owned subsidiary of CSCorp, served as the Program sponsor. The “Algorithm” and the 
various parameters that help determine asset allocations and security selection in the Program—all defined 
and/or described below—have not changed as a direct result of the change in Program sponsorship. 
 
Services, Fees and Compensation 
Services 
Schwab Intelligent Portfolios provides automated investment advisory services to clients with at least $5,000 to 
invest. Clients will receive a diversified portfolio composed of exchange-traded funds (ETFs), as well as an FDIC-
insured cash allocation (the “Cash Allocation”) that is based on the client’s stated investment objectives and risk 
tolerance. The portfolio of ETFs includes up to 20 asset classes across stocks, fixed income, real estate, and 
commodities. The Program is designed to monitor a client’s portfolio daily and will also automatically rebalance 
as needed to keep a client’s portfolio consistent with their selected risk profile unless such rebalancing may not 
be in the best interest of the client. 
 
Schwab provides administration and related services for the Program. Charles Schwab Investment Advisory, Inc. 
(“CSIA”), an affiliate of Schwab, provides portfolio management services for Program accounts on a discretionary 
basis consistent with each client’s chosen investment strategy. Schwab acts as the qualified custodian for 
Program accounts and provides trade execution, research and related services for Program accounts. 
The Program is offered online through an interactive website and mobile application (collectively, the “Program 
Website”). Clients can communicate with Schwab via electronic channels (i.e., email, chat, website or mobile 
application), Schwab branches and via telephone. 
 
Clients use a web or mobile application to determine whether the Program is appropriate for them and, if so, 
are asked a series of questions that the Algorithm uses to determine their investment risk profile, receive a 
recommended portfolio, and select an investment strategy. Clients complete their investment profile online and 
are asked to carefully consider whether their participation in the Program is appropriate for their investment 
needs and goals prior to enrollment. Clients can change their investment strategy by going online and 
completing a new web- or mobile-based investment profile. Clients should periodically review their existing 
investment risk profile and update it when their goals, risk tolerance or other aspects of their financial situation 
change. 
 
During the online application process, clients agree that records and disclosures for the Program will be 
delivered, and agreements will be signed, electronically. This is a requirement both now and in the future. This 
includes the disclosure brochures, supplements, and other documents relating to clients’ accounts. Each client 
has an obligation to maintain an accurate and up-to-date email address with Schwab and to ensure that the 
client has the ability to read, download, print, and retain documents the client receives from Schwab. If a client 
is unable or unwilling to accept electronic delivery, the client’s enrollment in the Program and their account may 
be terminated. If a client’s account is terminated, the client will be required to transfer the client’s account 
assets to another account at Schwab or an account at another custodian; otherwise, the client’s account assets 
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will be liquidated and proceeds will be sent to the client. 
 
The Program Website allows prospective clients to review information about the Program, including general 
information on the types of ETFs included as well as information about CSIA’s approach to allocating client 
accounts. Clients may also monitor their portfolio’s allocation and activity, monitor their account’s performance, 
and use a goal tracking tool to monitor whether their account is on target to reach their savings or income goal. 
Clients may also initiate deposits and withdrawals from existing Program accounts or open new Program 
accounts. Clients give investment discretion to CSIA to manage their account and make trades in their account, 
and CSIA may therefore initiate or halt trading at its discretion and for any reason, including halting trading 
under conditions when CSIA believes that continued trading may pose an undue risk of harm to Program 
accounts. 
 
The Program uses an algorithm (the “Algorithm”)—a set of rules embedded in a computer program—to: (1) 
propose a portfolio based on a client’s answers to the online questionnaire; (2) identify portfolio rebalancing 
opportunities; (3) identify tax-loss harvesting opportunities; and (4) initiate buy/sell orders for the tax-loss 
harvesting and/or rebalancing opportunities it has identified, as detailed below. The Algorithm is designed to 
perform a daily review of client accounts and holdings to identify rebalancing and tax-loss harvesting 
opportunities as well as to initiate buy or sell orders when such opportunities exist; trade orders are then sent to 
CSIA for review prior to the trade(s) being released for execution. Although the activities described in this 
paragraph generally take place on a daily basis, there may be rare instances when they do not due to 
unforeseen circumstances. 
 
Clients will not be allowed to make trades in their account. Clients may request that certain ETFs be excluded 
from their account, but CSIA is not required to accept account restrictions that it deems unreasonable. A request 
to exclude certain ETFs from a client’s account may result in delays in the management of the account. The 
client will be notified if the account cannot be managed with the requested investment restrictions. Clients also 
may request that CSIA use a tax-loss harvesting strategy so that tax losses are generated to offset potential 
capital gains in their account, subject to meeting minimum balance requirements (currently $50,000, which is 
subject to change). 
 
Accounts in the Program are not margin accounts, meaning clients cannot borrow money to buy securities in 
their Program accounts and use the securities in the accounts as collateral for a margin loan. 
 
Investment Strategies  
Using asset allocations and ETF selection parameters determined by Schwab, CSIA has created a number of 
investment strategies for the Program. The investment strategies consist of diversified portfolios of ETFs 
combined with the Schwab Intelligent Portfolios Sweep Program (“Sweep Program”), which automatically 
deposits, or “sweeps,” free credit balances to deposit accounts at Charles Schwab Bank (“Schwab Bank”). Each 
investment strategy is designed to be consistent with a certain combination of investment objectives and risk 
tolerance. Certain investment strategies are intended for taxable accounts and others for tax-deferred accounts 
(such as individual retirement accounts). Certain investment strategies are intended for clients who are looking 
for some level of income generation. Not all investment strategies will be appropriate for or available to all 
clients. For instance, certain investment strategies will only be available to clients who are enrolled in the 
Schwab Intelligent Advisory® program, a hybrid advisory service that combines financial planning and periodic 
guidance from Schwab planning consultants with discretionary portfolio management through the SIP Program. 
Schwab may add additional investment strategies or modify the parameters for existing investment strategies at 
any time without prior notice to clients. 
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Selection of ETFs 
The written parameters established by Schwab place limitations on the universe of ETFs that CSIA may select for 
the Program.  
 
Schwab has ETF selection parameters designed to support its philosophy of low-cost and index-based investing. 
In support of providing broadly diversified and risk-adjusted portfolios, eligible ETFs must represent well a 
particular asset class in the portfolio, meet sufficient liquidity standards and be among the lowest cost (in terms 
of its operating expense or “OER”) in their asset class or category. When it comes to replacing an ETF, CSIA also 
considers the potential impact to clients, such as additional trading costs or other costs.  
 
 
Eligible ETFs include Schwab ETFs™, which are managed by Charles Schwab Investment Management, Inc. 
(“CSIM”), an affiliate of Schwab and CSIA. Schwab has instructed CSIA to select or retain Schwab ETFs in the 
portfolios as long as CSIA determines they satisfy the above factors. 
 
CSIA will generally select both a primary and secondary ETF for each asset class in consideration of, among other 
things, tax-loss harvesting and requested investment restrictions. In limited circumstances, as determined by 
CSIA, only one ETF may be used in certain asset classes. In such cases, the tax-loss harvesting feature would not 
be available for execution in the affected asset class(es). To be eligible for consideration, ETFs designated as the 
primary ETF in an asset class must have a share price less than a cap that is necessary to enable trading in 
smaller balance accounts. 
 
Schwab ETFs pay fees to CSIM that are described in “Participation or Interest in Client Transactions” below. 
 
Rebalancing 
The rebalancing component of the Algorithm is designed to conduct a daily review of client accounts for 
rebalancing opportunities. If the allocation of the ETFs in a client’s account deviates by more than an amount 
specified in Schwab’s parameters from the recommended asset allocation due to changes in ETF values, the 
Algorithm will initiate a rebalancing trade order. Program trades are sent to CSIA for review prior to being 
routed for execution. The Algorithm may also trigger rebalancing in cases when a client makes changes to their 
investment profile or when a client requests to impose or modify restrictions on the management of their 
Program account. Program accounts will be rebalanced by buying and selling ETF shares and depositing or 
withdrawing funds through the Sweep Program. Program monitoring and trading are subject to systems and 
technology constraints and availability, and while unlikely, may not take place daily. 
 
Accounts below $5,000 may deviate further than the amount specified in Schwab’s rebalancing parameters as 
well as the target allocation of the selected investment profile. Rebalancing below $5,000 may impact the ability 
to maintain positions in selected asset classes due to the inability to buy or sell at least one share of an ETF. For 
example, withdrawal requests may require entire asset classes to be liquidated to generate and disburse the 
requested cash. 
 
Tax-Loss Harvesting 
Subject to meeting the minimum balance requirement of $50,000, clients may direct CSIA to employ a tax-loss 
harvesting strategy. As discussed above, the Algorithm is designed to conduct a daily review of client accounts 
for tax-loss harvesting opportunities. When the tax-loss harvesting threshold is met, the Algorithm will initiate a 
tax-loss harvesting trade order for Program accounts. During this process, certain ETFs in the client’s account will 
be sold at a loss to offset potential capital gains (although CSIA does not monitor the type and amount of capital 
gains). The Algorithm also initiates a buy order to replace the ETFs sold for tax-loss harvesting purposes with the 
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ETF(s) that CSIA reasonably believes are not substantially similar based upon different ETF indexes used by each 
ETF. 
 
The performance of the new ETFs may be better or worse than the performance of the ETFs that are sold for 
tax-loss harvesting purposes. The utilization of losses harvested through the strategy will depend upon the 
recognition of capital gains in the same or a future tax period, and in addition may be subject to limitations 
under applicable tax laws. Losses harvested through the strategy that are not utilized in the tax period when 
recognized generally may be carried forward to offset future capital gains, if any. 
 
Clients should consult with their professional tax advisors or check the Internal Revenue Service (“IRS”) website 
at www.irs.gov about the consequences of tax-loss harvesting in light of their particular circumstances and its 
impact on their tax return. Neither the tax-loss harvesting strategy for the Program, nor any discussion herein, is 
intended as tax advice, and neither Schwab nor CSIA represents that any particular tax consequences will be 
obtained. 
 
CSIA only monitors for tax-loss harvesting for accounts within the Program. The client is responsible for 
monitoring their and their spouse’s non-Program accounts (at Schwab or with another firm) to ensure that 
transactions in the same ETF or a substantially similar security do not create a “wash sale.” A wash sale is the 
sale at a loss and purchase of the same ETF or substantially similar security within 30 days of each other. If a 
wash sale transaction occurs, the IRS may disallow or defer the loss for current tax reporting purposes. More 
specifically, the wash sale period for any sale at a loss consists of 61 calendar days: the day of the sale, the 30 
days before the sale, and the 30 days after the sale. The wash sale rule postpones losses on a sale if replacement 
shares are bought around the same time. 
 
The effectiveness of the tax-loss harvesting strategy to reduce the tax liability of the client will depend on the 
client’s entire tax and investment profile, including purchases and dispositions in a client’s (or client’s spouse’s) 
non-Program accounts and type of investments (e.g., taxable or non-taxable) or holding period (e.g., short-term 
or long-term). There is no guarantee that the tax-loss harvesting strategy will reduce, defer or eliminate the tax 
liability generated by a client’s investment portfolio in any given tax year. Except as set forth below, CSIA and 
the Algorithm will monitor only a client’s (or a client’s spouse’s) Program accounts to determine if there are 
unrealized losses for purposes of determining whether to harvest such losses. Transactions outside the Program 
may affect whether a loss is successfully harvested and, if so, whether that loss is usable by the client in the 
most efficient manner. 
 
If a client chooses to have tax-loss harvesting for the client’s taxable Program account, CSIA will seek to avoid 
the wash sale disallowance rule in any other Program account with the client’s social security number as the 
primary account holder. A client may also request that CSIA monitor the client’s spouse’s accounts or their IRAs 
in the Program to avoid the wash sale disallowance rule. A client may request spousal monitoring online or via 
the mobile application. If CSIA is monitoring multiple accounts to avoid the wash sale disallowance rule, the first 
taxable account to trade an ETF will block the other account(s) from trading in that same ETF for 30 days. 
 
Schwab Intelligent Portfolios® Sweep Program 
Each investment strategy involves the Cash Allocation to the Sweep Program. The Cash Allocation will generally 
range from 6% to 30% of an account’s value to be held in cash, depending on the investment strategy the client 
selects based on the client’s risk tolerance and time horizon. 
 
The Cash Allocation will be accomplished through enrollment in the Sweep Program, a program sponsored by 
Schwab. By enrolling in the Program, clients consent to having the free credit balances in their brokerage 
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accounts swept to deposit accounts (“Deposit Accounts”) at Schwab Bank through the Sweep Program. Schwab 
Bank is an FDIC-insured depository institution affiliated with Schwab and CSIA. 
 
The Sweep Program is a required feature of the Program. If the cash balances exceed the Cash Allocation for the 
selected investment strategy, the excess over the rebalancing parameter will be used to purchase securities as 
part of rebalancing. If clients request cash withdrawals from their accounts, this likely will require the sale of ETF 
positions in their accounts to bring their Cash Allocation in line with the allocation for their chosen investment 
strategy. If those clients have taxable accounts, those sales may generate capital gains (or losses) for tax 
purposes. 
 
The terms and conditions of the Sweep Program and Schwab’s ability to make changes to the Sweep Program or 
move balances to a new sweep product are set forth in the Schwab Intelligent Portfolios® Sweep Program 
Disclosure Statement that is made available to clients when they open their accounts. Clients should read this 
document carefully and retain a copy for their records. Clients grant to Schwab the authority to change the cash 
investment allocation from the Sweep Program to another cash savings or investment product or vehicle offered 
by Schwab, an affiliate, or a third party. 
 
In accordance with an agreement with Schwab, Schwab Bank has agreed to pay an interest rate on cash 
balances in the Sweep Program which will be the greater of either (1) the rate determined by reference to a 
third-party index (the average national money market deposit account rate for retail deposits at the $100,000 
level based on a survey conducted by RateWatch), or (2) the rate paid on cash balances of $1,000,000 or more in 
Schwab’s bank sweep program for brokerage accounts (known as the Bank Sweep feature in Schwab’s Cash 
Features Program). The current rate for cash in your account and information regarding the rate Schwab Bank 
pays for the $1,000,000 cash tier for brokerage accounts, as well as RateWatch’s methodology, can be found at 
www.schwab.com/intelligent-cashrate. 
 
Under the agreement between Schwab and Schwab Bank, Schwab Bank may change the method of determining 
the interest rate upon 30 days’ notice to Schwab or upon a regulatory requirement. Schwab will notify clients if 
it receives such notice from Schwab Bank. The rate may be higher or lower than the interest rates available on 
other deposit accounts at Schwab Bank or on comparable deposit accounts at other banks. It may also be higher 
or lower than other cash-equivalent investments, such as money market funds, that are available through 
Schwab. Schwab does not intend to negotiate for rates that seek to compete with other capital preservation 
investment options that involve market risk, such as money market funds. 
 
Schwab Bank’s revenue from the Cash Allocation in the Deposit Accounts is dependent upon the difference, or 
“spread,” between the interest rate Schwab Bank pays to clients on such deposits and the amount it can earn 
from the extension of loans and the purchasing of investment securities with these deposits as well as the FDIC 
insurance premiums it pays. Therefore, Schwab Bank’s ability to earn revenue from the Deposit Accounts is 
affected by the interest rate negotiated with its affiliated broker-dealer, Schwab. This revenue is a component of 
the overall revenue to Schwab Bank and its affiliates in connection with the Program. Funds in the Deposit 
Accounts can also benefit Schwab Bank by providing it with increased liquidity, stable funding, and low cost 
deposits. Schwab Bank intends to use the assets in the Deposit Accounts to fund current and new lending 
activities and investments. 
 
A portion of the revenue contributed to the Schwab entities from the Program is the revenue earned by Schwab 
Bank in offering the Deposit Accounts. Schwab Bank will pay Schwab a fee for administrative services provided 
in support of the Deposit Accounts as disclosed in the Schwab Intelligent Portfolios Sweep Program Disclosure 
Statement and below in “Participation or Interest in Client Transactions.” 
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Fees and Compensation 
The Program includes the following services: (i) Schwab’s Program administration services, as well as trade 
execution, custody and related services; and (ii) CSIA’s portfolio management services. Clients are not charged 
an annual Program fee for these services.  However, the SIP Program is not free of charge.  Clients pay the 
operating expense ratios of ETFs used in the portfolios, including Schwab ETFs, which affects the performance of 
SIP Program accounts.  Account performance is also affected by the Cash Allocation and the Sweep Program.  
Schwab and its affiliates earn compensation from certain ETFs used in the portfolios and from the Cash 
Allocation and Sweep Program, as described elsewhere in this brochure in “Schwab Intelligent Portfolios Sweep 
Program”, “Benefits to Schwab Affiliates” and “Conflicts of Interest and How They Are Addressed.” 
 
In programs similar to the SIP Program, clients might expect to pay an annual fee of 0.30% of client assets to 
reflect the value and cost of these services. While clients are not charged a Program fee for services, due to 
retirement accounts in the Program, for purposes of IRS rules, Schwab makes a nominal calculation that fully 
offsets in the amount of 0.30% of the compensation that it or its affiliates receive from ETF transactions in 
clients’ accounts. This includes advisory fees for managing Schwab ETFs™ and fees earned for providing services 
to third-party ETFs participating in the Schwab ETF OneSource™ program (“ETF OneSource”), if CSIA selects 
them to include in Program accounts. If this affiliate compensation ever exceeds 0.30% of client assets, Schwab 
would refund the additional amount to client accounts or use it to pay account administrative expenses. The 
result is that clients pay no annual Program fee. 
 
Clients do not pay brokerage commissions in the Program to Schwab. However, if CSIA uses a broker-dealer 
other than Schwab that is acting as principal (for its own account) to buy or sell ETF shares for clients, that 
broker-dealer accepts the risk of market price and liquidity fluctuations when executing customer orders. The 
broker-dealer adds a fee, called a “spread,” to compensate for this risk. The spread is not shown separately on a 
client’s trade confirmation or account statement. Schwab does not act as principal for ETF trades in the Program 
and does not receive any part of the spread. 
 
Each ETF, including a Schwab ETF, pays investment advisory, administrative, distribution, transfer agent, 
custodial, legal, audit, and other customary fees and expenses, as set forth in the ETF prospectus. An ETF pays 
these fees and expenses, which ultimately are borne by its shareholders. Therefore, CSIM (a Schwab affiliate) 
will earn fees from Schwab ETFs that are held in Program accounts. 
 
Clients may incur sales charges, redemption fees and other costs, as well as tax consequences, if they redeem or 
make other transactions in ETFs, mutual funds or other investments in order to fund Program accounts. 
To the extent that cash used by clients to fund their Program accounts comes from redemptions of mutual fund 
shares, ETFs or other investments outside of the Program, there may be tax consequences or additional costs 
from sales charges previously paid and redemption fees incurred. 
 
Pursuant to an agreement between CSIA and Schwab, Schwab pays all costs and expenses incurred by CSIA in 
connection with the Program and with other research services provided by CSIA, plus an additional amount 
based on a fixed percentage of such costs and expenses. CSIA does not enter into agreements directly with 
clients and accordingly does not receive direct compensation from or negotiate fees with them. CSIA does not 
enter into agreements directly with Program clients and accordingly does not receive direct compensation from 
or negotiate fees with them. 
 
Schwab provides administrative services to Schwab Bank in support of the operation of the Deposit Accounts; 
Schwab Bank will pay Schwab an annual per account flat fee for these administrative services. This fee is more 
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fully described in the Schwab Intelligent Portfolios Sweep Program Disclosure Statement. 
 
The fees that clients pay directly and indirectly in the Program may be more or less than they would pay if they 
purchased separately the types of services in the Program. Clients may be able to obtain some or all of the types 
of services available through the Program on a stand-alone basis from other firms. Factors that bear upon the 
cost of the Program in relation to the cost of the same services purchased separately include, among other 
things, the type and size of the account (and other accounts that clients may be able to combine to determine 
fee break points), the historical and expected size or number of trades for an account, types of investments and 
cash held in the account, and the number and range of supplementary advisory and other services provided to 
an account. 
 
Compensation FC Compensation 
Among Schwab investment professionals, branch-based and phone-based Financial Consultants (“FCs”) are most 
often responsible for recommending the SIP Program to clients like you. FCs may be Schwab employees or non-
employee independent contractors who, with their own employees, operate Schwab Independent Branches 
pursuant to a franchise agreement with Schwab. The FCs who operate Schwab Independent Branches are known 
as Independent Branch Leaders (“IBLs”) or, if employed by such IBLs, Independent Branch (“IB”) 
Representatives. In addition to their base salaries, FCs receive compensation for successfully navigating clients 
to the SIP Program and other investment advisory programs and for servicing those clients after enrollment in 
such programs. Although Schwab as a company may earn more or less revenue depending on what products and 
services an FC recommends and a client purchases, Schwab has designed FC compensation to be neutral. This 
means that, although compensation varies by the type of program an account is enrolled in, that difference is 
based on “Neutral Factors.” Neutral Factors include the time, complexity and expertise necessary to understand 
and recommend a program and to provide ongoing service to a client enrolled in a given program. 
 
As independent contractors, IBLs receive a monthly “Net Payout” from Schwab, which includes amounts earned 
on assets in investment advisory programs like the SIP Program and assets in commission-based brokerage 
accounts, and it is from this Net Payout amount that IBLs pay their IB Representative employees. As with FCs, 
the amounts earned by IBLs and IB Representatives vary by the type of program an account is enrolled in, based 
on the same Neutral Factors described above. Based on these Neutral Factors, amounts earned by Financial 
Consultants on assets enrolled in the SIP Program exceed the amounts earned on assets in commission-based 
brokerage accounts but are less than the amounts earned on assets in some other advisory program accounts. 
 
Compensation to Other Schwab Investment Professionals 
Other Schwab employee investment professionals, such as Investment Consultants, Investor Development 
Specialists, and Participant Investor Concierge Financial Consultants, can also earn additional incentive 
compensation for educating clients in advisory services, including the Program. For detailed information on the 
compensation of these and other Schwab investment professionals, please see our website at 
schwab.com/compensation. 
 
Performance-Based Fees 
Schwab does not receive performance-based fees in connection with referrals to the SIP Program. 
 
Side-by-Side Management 
Not applicable. Schwab does not manage or recommend strategies in the SIP Program. 
 
Benefits to Schwab Affiliates 
Clients do not pay a Program management fee. However, Schwab affiliates do earn revenue from the underlying 
10 
 
assets in client accounts. 
 
This revenue comes from: (i) revenue earned by Schwab Bank, on the Cash Allocation in the investment 
strategies; (ii) advisory fees received by CSIM from Schwab ETFs™ that CSIA selects to buy and hold in client 
accounts; (iii) fees received by Schwab from third-party ETFs in client accounts for services Schwab provides to 
them as participants in ETF OneSource; and (iv) remuneration Schwab may receive from the market centers 
where it routes ETF trade orders for execution. More information about these revenues and their benefits to 
Schwab affiliates is set forth under “Schwab Intelligent Portfolios® Sweep Program” and “Fees and 
Compensation” above and under “Participation or Interest in Client Transactions” below. 
 
Conflicts of Interest and How They Are Addressed 
 
As noted above, Schwab Bank earns income on the Cash Allocation for each investment strategy.   The Cash 
Allocation is placed in an FDIC insured deposit account at Schwab Bank.  The higher the Cash Allocation and the 
lower the interest rate paid to clients, the more Schwab Bank earns.  A lower interest rate means a lower yield 
on the Cash Allocation.  This is a conflict of interest.  It is mitigated in part by the way in which Schwab Bank 
determines the interest rate on cash balances in the Sweep Program by reference to the greater of a third-party 
index (the average national money market deposit account rate for retail deposits at the $100,000 level) or the 
rate Schwab Bank pays on cash balances of $1,000,000 or more in its sweep program for brokerage accounts.  
Outside of the Program, clients have access to some cash alternatives that pay a higher yield, although they may 
not have FDIC insurance.  In part because of the revenue Schwab Bank generates from the Cash Allocation (an 
indirect Program cost), Schwab does not charge an advisory fee for the Program.   
 
Net interest revenue is a major source of revenue for Schwab Bank, including with respect to the Program.  
Schwab Bank’s net interest revenue is generated by the difference between the interest rate that it can earn 
extending loans and purchasing investment securities, and the interest rate it pays to clients on their Sweep 
Program deposits.  The difference between the rates earned and paid is the “spread.”   Generally an increase in 
market interest rates will mean that the Program earns more revenue for Schwab Bank because the spread will 
increase. 
 
Here is an example of how the spread works and the resulting revenue to Schwab Bank.  Assume a $100,000 
Program account with a 10% Cash Allocation ($10,000), which would be a moderate – aggressive investment 
portfolio allocation.  Using market interest rates from the third quarter of 2018, Schwab Bank earned about 2% 
on an annual basis on the cash it invested net of what it paid to clients in the Program.  Schwab Bank would have 
received about $200 on that cash deposit annualized.  This is two-tenths of one percent (0.2% or 20 basis points) 
of the total client investment of $100,000.  This example is for illustrative purposes only and does not 
necessarily reflect the interest rate a particular client at a particular point in time receives or the revenue 
Schwab Bank earns from that client’s Cash Allocation.  We will update this example on a quarterly basis 
beginning in January 2019, which you can see at www.schwab.com/intelligent-cashrate. 
 
Note also that in the above example Schwab Bank would receive more than 20 basis points on a Cash Allocation 
above 10% (as part of a more conservative investment portfolio allocation), and less than 20 basis points on a 
Cash Allocation below 10% (as part of a more aggressive investment portfolio allocation).  Historically the spread 
has increased when market interest rates rose.  Since the Program’s inception until September 2018, the overall 
average spread Schwab Bank received ranged from 1.21% to 1.95%.  For more information on how the Sweep 
Program works, including how to determine current interest rates on the Cash Allocation, please see “Schwab 
Intelligent Portfolios Sweep Program” above. 
 
11 
 
 
Because Schwab and CSIA are affiliated companies, Schwab has an incentive to select and keep CSIA to provide 
portfolio management services for the Program. Similarly, CSIA has a conflict of interest in selecting Schwab 
ETFs, which pay compensation to CSIM, and ETFs in ETF OneSource, which pay compensation to Schwab. 
Schwab has a conflict in that it has instructed CSIA to select or retain Schwab ETFs in the portfolios, but only if 
Schwab ETFs meet all the criteria noted above in “Selection of ETFs.” CSIA also has a conflict of interest because 
it selects ETFs that it holds in other client accounts CSIA manages in other Schwab programs. 
 
Asset classes in the Program include both market-cap and fundamentally weighted ETFs. Market-cap weighted 
ETFs track indices based on the market capitalization of the index’s underlying holdings. Fundamental ETFs 
weight holdings based on fundamental factors like sales, cash flow, dividend distribution, and buybacks. The 
Program invests in both market-cap based and fundamentally weighted ETFs with the goal of helping to increase 
diversification, reduce volatility, and provide better risk-adjusted results over time. Typically, fundamental ETFs 
have a higher expense ratio than market-cap ETFs. The current method CSIA uses to select fundamentally 
weighted ETFs is based on asset classification by a third-party provider and, in combination with the selection 
criteria described above, results in Schwab ETFs being the primary ETF selection for fundamental asset classes in 
portfolios. 
 
Other than the conflicts of interest described in “Selection of ETFs,” Schwab’s written parameters do not allow 
CSIA to consider compensation to Schwab or other affiliates in connection with selecting ETFs or managing 
Program portfolios. CSIA must also follow these written criteria in selecting securities for, and removing 
securities from, Program portfolios. Schwab reviews CSIA’s performance in providing portfolio management 
services for the Program. For more information regarding how ETFs are selected for inclusion in portfolios and 
on the fees earned by Schwab affiliates on ETFs in client accounts, see “Selection of ETFs” and “Fees and 
Compensation” above. 
 
Account Requirements and Types of Clients 
Clients will complete an investment profile, open their account, and sign their Program contracts electronically. 
Clients of the Program may include individuals, IRAs and living trusts. Organizations, such as corporations, 
limited liability companies and limited partnerships, may also participate in the Program as clients. These types 
of clients may not have the same client experience as individuals or trust clients. Clients that are government 
entities or clients that are subject to the Employee Retirement Income Security Act of 1974, as amended 
(“ERISA”), are not eligible for the Program. 
 
Clients must agree to accept electronic delivery of contracts, disclosure documents, prospectuses, statements, 
and other materials. Assistance from a Schwab representative is available by telephone, email or web chat. 
Deposits to the account must be made by wire transfer, mobile check deposit, transfer from another account, or 
through the Schwab MoneyLink® service, which allows clients to make electronic transfers of funds to and from 
their brokerage account. Clients may be provided the option to fund Program accounts with securities. Clients 
authorize Schwab (or CSIA to instruct Schwab) to liquidate any securities used to fund Program accounts. 
Securities may be liquidated at the client’s risk and expense and without taking into account the realization of a 
taxable gain or a loss that may result. 
 
Neither CSIA nor Schwab will have responsibility for the performance of those securities pending their 
liquidation. 
 
To be initially invested in an investment strategy, clients must meet all requirements of Schwab to open their 
Program account and fund it with a minimum of $5,000. Not all clients or prospects will be appropriate for the 
12 
 
Program. There is also a minimum balance requirement to request that CSIA employ a tax-loss harvesting 
strategy, and a minimum balance requirement to maintain a tax-loss harvesting strategy. 
 
A client that terminates their advisory agreement or brokerage agreements with Schwab relating to the Program 
may unenroll from the Program or instruct Schwab to close their account. If the client terminates their 
enrollment in the Program, the Sweep Program will not apply to the account. That account will have its own 
sweep feature, which may have terms that are more favorable or less favorable than the Sweep Program. 
Schwab may terminate a client from the Program for failing to fund their account with the required initial 
minimum, for failure to maintain a valid email address or for any other reason, in Schwab’s sole discretion. 
Schwab also may terminate a client from the Program if Schwab deems the client’s requested investment 
restrictions to be unreasonable. 
 
Depending on the reason for unenrollment from the program, the client may have the opportunity to resolve 
the reason for their unenrollment. Upon removal from the program, the client’s enrollment in the Sweep 
Program will terminate and the account will no longer be managed. 
 
Retirement Accounts 
Schwab does not and will not render advice on a regular basis pursuant to an arrangement or understanding 
that such advice shall serve as a primary basis for investment decisions with respect to any retirement account. 
Schwab and its employees and agents (i) are not fiduciaries as defined under the Internal Revenue Code; (ii) 
have no investment or other discretion with respect to assets covered by the Program; (iii) will perform no 
discretionary acts with respect to such assets; (iv) will effect only such transactions as instructed by clients; and 
(v) will exercise no discretion and provide no advice as to the voting of proxies. 
 
CSIA is the sole fiduciary, as defined under the Internal Revenue Code, in performing investment management 
services and exercising discretion over the assets managed in any retirement account, subject to such 
reasonable restrictions as the client may impose. 
 
Portfolio Manager Selection and Evaluation 
Schwab has selected CSIA to provide portfolio management services for the Program. Schwab believes that CSIA 
possesses the requisite expertise to serve in this capacity. Schwab reviews the performance of the investment 
strategies quarterly through standardized composite performance reporting. 
 
Client Information Provided to Portfolio Manager 
At the time a client enrolls in the Program, Schwab provides CSIA with information about that client’s chosen 
investment strategy and any reasonable restrictions applicable to the client’s Program account. 
 
Schwab provides updated information to CSIA as necessary thereafter in order for CSIA to provide portfolio 
management services under the Program. 
 
Client Contact With Portfolio Manager 
Clients who wish to contact CSIA can do so by making a request to a Schwab representative by telephone or web 
chat. Schwab and its representatives are the primary points of contact for clients in the Program.  
 
Additional Information 
Risks 
Investing in securities, whether through the Program or otherwise, involves the risk of loss that clients should be 
13 
 
prepared to bear. The specific risks associated with the ETFs comprising the Program portfolios, as well as the 
risks associated with securities held in those ETFs, are described in detail in the CSIA Schwab Intelligent 
Portfolios® Disclosure Brochure. The rebalancing aspect of the Algorithm works to maintain asset class 
diversification for each portfolio within defined parameters. 
 
There are limitations inherent in the use of an Algorithm to manage Program accounts; for instance, the 
Algorithm is designed to manage Program accounts according to the asset allocation selected for that account 
and is not designed to actively manage asset allocations based on short-term market fluctuations. The Algorithm 
is also not designed to consider certain factors such as short-term asset class volatility or individual tax 
circumstances such as capital gains taxes; rather, its functions consist of proposing a portfolio based on a client’s 
answers to the online questionnaire, identifying opportunities for tax-loss harvesting and rebalancing, and 
initiating buy/sell orders accordingly. 
 
Investment advisory personnel of CSIA oversee the Algorithm but do not personally or directly monitor each 
individual Program account. 
 
There is also a risk that the Algorithm and related software used in the Program for strategy selection, tax-loss 
harvesting and rebalancing and related functions may not perform within intended parameters, which may 
result in a recommendation of a portfolio that may be more aggressive or conservative than necessary, and 
trigger or fail to initiate rebalancing and/or tax-loss harvesting trading. 
 
Disciplinary Information 
The SEC and other regulatory agencies and organizations have taken certain disciplinary actions against Schwab 
for violations of investment-related statutes, regulations, and rules. The matters have been settled, and Schwab 
has paid fines with respect to certain violations. 
 
1. A disciplinary action initiated by the Financial Industry Regulatory Authority (“FINRA”) asserted that, in violation 
of FINRA Rules 2010 and 3310(a), Schwab failed to implement policies and procedures that were reasonably 
designed to detect and cause the reporting of suspicious incoming wire transactions occurring in August 2011. 
Without admitting or denying the findings, Schwab consented to the described sanctions and to the entry of 
findings. Therefore, in December 2013, Schwab was censured, fined $175,000 and required to conduct a 
comprehensive review of the adequacy of its Anti-Money Laundering policies, systems, procedures (written or 
otherwise), and training with respect to detecting and reporting suspicious incoming wire transfers. 
 
2. A disciplinary action initiated by FINRA asserted that Schwab failed on 44 occasions during the second quarter of 
2011 and on 245 occasions during the first half of the 2012 review period to provide written notification 
disclosing to its customers a call date that was consistent with the disclosed yield to call in violation of SEC Rule 
10b-10. Without admitting or denying the allegations, Schwab consented on August 23, 2013, to a censure and a 
monetary fine of $12,500. 
 
3. A disciplinary action initiated by the Chicago Board of Options Exchange (“CBOE”) alleged that Schwab: (1) 
violated CBOE Rule 9.21 by disseminating sales literature and failed to withhold the sales literature from 
circulation prior to incorporating the required changes specified by the CBOE; and (2) violated CBOE Rule 4.2 by 
failing to adequately supervise its associated persons to assure compliance with Rule 9.21. Without admitting or 
denying these allegations, Schwab consented to a censure and a monetary fine of $10,000 on May 29, 2013.  
 
4. In May 2013, the CBOE alleged that from approximately November 8, 2011, through approximately December 7, 
14 
 
2011, Schwab failed to have adequate supervisory procedures to assure compliance with the SEC Rule 14E-4 
relating to partial short tender activity. The CBOE accepted Schwab’s offer of settlement consisting of a $10,000 
fine and a censure. Schwab neither admitted nor denied the allegations. 
 
5. A disciplinary action initiated by FINRA asserted that Schwab violated Municipal Securities Rulemaking Board 
(“MSRB”) Rule G-14 by: (1) failing to report required information about certain municipal securities transactions 
to the Real-Time Transaction Reporting System (“RTRS”) within 15 minutes of trade time in the first and fourth 
quarters of 2010; and (2) failing to report the correct yield to RTRS for certain municipal securities transactions 
in the second quarter of 2010. Without admitting or denying these assertions, Schwab consented to a censure 
and a fine of $35,000 on July 26, 2012. 
 
6. Schwab entered into a stipulation and consent agreement with the state of Florida on March 26, 2012, in which 
Schwab was fined $1,100,000 and ordered to offer restitution to certain clients for distributing trade 
confirmations to Florida clients between 2008 and 2011 containing inaccurate information with respect to 
certain municipal bond, corporate bond and preferred equity security trades, and for failing to have adequate 
written supervisory procedures with respect to the review of such trade confirmations, in violation of the Florida 
Administrative Code. 
 
7. Schwab entered into a consent order with the State of Nevada on November 2, 2011, in which Schwab was fined 
$10,000 for failing to detect the lack of Nevada state registration of a non-employee investment advisor. Schwab 
was found to have violated its own procedures and Nevada Administrative Code Section 90.321 for failing to 
determine that the non-employee was acting as a professional investment advisor at the time the accounts were 
set up or during the course of his management of the accounts at issue. 
 
8. A disciplinary action initiated by FINRA asserted that Schwab violated Municipal Securities Rulemaking Board 
Rule G-14 by: (1) failing to report required information about certain municipal securities transactions to the 
RTRS within 15 minutes of trade time; and (2) failing to report the correct trade execution time to the RTRS for 
some of these transactions. Without admitting or denying these assertions, Schwab consented to a censure and 
a fine of $12,500 on June 17, 2011. 
 
9. In January 2011, Schwab and its affiliate Charles Schwab Investment Management, Inc. (“CSIM”) (together, for 
purposes of this disclosure, “Schwab”) reached agreements with the SEC, FINRA, the Illinois Secretary of State, 
the Illinois Securities Department (“Illinois”) and the Connecticut Department of Banking’s Securities and 
Business Investments Division (“Connecticut”) to settle matters related to the Schwab YieldPlus Fund®(the 
“Fund”). 
 
As part of the SEC settlement, the SEC found that Schwab violated certain investment-related laws and 
regulations related to the offer, sale and management of the Fund from 2005 through 2008. In particular, the 
SEC found that Schwab: (1) deviated from the Fund’s concentration policy with respect to investments in non-
agency mortgage-backed securities without shareholder approval; (2) made materially misleading statements 
and omissions about the Fund and its associated risks before and during the decline of its net asset value 
(“NAV”); (3) materially understated the Fund weighted average maturity (“WAM”); (4) willfully aided and 
abetted misstatements and omissions appearing in Fund sales materials and other documents; and (5) lacked 
policies and procedures reasonably designed to prevent the misuse of material nonpublic information about the 
Fund. Without admitting or denying these allegations, Schwab agreed to pay a total of approximately 
$118,944,996 in disgorgement of fees and penalties. As part of the settlement with the SEC, Schwab will also 
take a number of actions to improve procedures and reinforce Schwab’s commitment to its clients. These 
actions include retaining an independent consultant to conduct a comprehensive review of Schwab’s policies, 
15 
 
practices and procedures designed to prevent the misuse of material nonpublic information by or related to 
Schwab’s mutual funds. The SEC settlement was approved by the United States District Court for the Northern 
District of California on February 16, 2011. Additionally, the SEC has brought related complaints against two 
former employees of Schwab. 
 
The amount paid by Schwab pursuant to the SEC settlement included approximately $18,000,000 to be paid by 
Schwab in settlement of the FINRA matter in which FINRA made related factual allegations against Schwab and 
found that Schwab’s conduct violated FINRA’s just and equitable principles of trade and its rules pertaining to 
communications with the public and supervision. 
 
Schwab also agreed to pay approximately $8,567,364 in settlement of the Illinois matter in which Illinois made 
related factual allegations against Schwab and found that Schwab’s conduct violated Illinois Securities Law 
provisions relating to supervision of securities and advisory activity by employees and to maintenance of written 
procedures reasonably designed to comply with securities laws and regulations. 
 
Schwab also agreed to pay an amount not to exceed approximately $2,800,000 in settlement of the Connecticut 
matter in which Connecticut made related factual allegations against Schwab and found that Schwab violated 
applicable Connecticut laws and regulations by failing to reasonably supervise its employees. 
 
Schwab and certain affiliated entities and individuals (the “Schwab Parties”) were named as defendants in a 
number of Fund-related class action lawsuits filed in the United States District Court for the Northern District of 
California in 2008. These lawsuits were consolidated into a single class action complaint that alleged violations of 
state law and federal securities law similar to those described above. On March 30, 2010, the court granted 
plaintiffs’ motion for summary judgment holding defendants liable for plaintiffs’ state law claim regarding 
changes to the investment policy of the Fund, which plaintiffs alleged were made without shareholder approval 
in violation of the Investment Company Act of 1940. The Schwab Parties entered into a settlement agreement to 
settle the plaintiffs’ federal securities law claims for approximately $202,700,000 and the plaintiffs’ California 
law claims for approximately $35,000,000. On April 19, 2011, the court entered an order granting plaintiffs’ and 
defendants’ motions for final approval of the settlement agreements. 
 
Other Financial Industry Activities and Affiliations 
As noted above, Schwab is a wholly owned subsidiary of CSCorp, a Delaware corporation that is publicly traded 
and listed on the NASDAQ (symbol: SCHW). Schwab is registered as a broker-dealer under the Securities 
Exchange Act of 1934 and is a member of FINRA. Schwab provides brokerage services to clients located 
throughout the United States and in some circumstances outside the United States. Incidental to its broker-
dealer business, Schwab offers its clients a variety of investment information services and products, including 
seminars, periodicals, reports, guides, planning tools, brochures and other publications about securities and 
investment techniques. Schwab also provides certain online data and financial reporting services. 
Schwab is also registered as an investment adviser under the Investment Advisers Act of 1940. Schwab provides 
other investment advisory services in addition to the Program. The SPC service is a nondiscretionary wrap fee 
program in which clients receive periodic, ongoing advice from a team of representatives. In the Schwab Advisor 
Network®, Schwab makes referrals of investment advisors to investors who are looking for assistance in 
managing their assets and/or other financial planning activities. Advisors participating in Schwab Advisor 
Network are independent and not affiliated with Schwab. Investment advisors pay a fee to participate in the 
Schwab Advisor Network program. 
 
Other programs in which Schwab acts as a registered investment advisor include the Managed Account Select® 
and Managed Account Connection®(“MAC”) wrap fee programs, Schwab Managed Portfolios™ (“SMP”), and the 
16 
 
Schwab Intelligent Advisory® program, all sponsored by Schwab and the financial planning services provided 
through the Schwab Personal Financial Plan™, Schwab Retirement Consultation, and Schwab Equity 
Compensation Consultation. Separate agreements and disclosure brochures are available for these other 
investment advisory services and would be provided at the time of referral or purchase. 
 
Schwab does not trade futures and is not a futures commission merchant (“FCM”). However, for our customers 
who have a desire to trade futures, we have a referral relationship with Charles Schwab Futures, Inc., an FCM 
that is an affiliate of Schwab. 
 
CSIA also provides portfolio management services in the Schwab-sponsored wrap fee programs, SMP, and MAC. 
CSIA acts as a separate account manager in MAC through its ThomasPartners Investment Management® 
(“ThomasPartners”) and Windhaven Investment Management®(“Windhaven”) business divisions. ETFs held in 
Program accounts may overlap with ETFs held in SMP—ETF accounts and in accounts invested in Windhaven® 
Strategies in MAC and similar strategies managed through other non-Schwab-sponsored programs. 
In addition to Schwab and CSIA, other wholly owned subsidiaries of CSCorp are engaged in investment advisory, 
brokerage, trust, custody, or banking services. CSIM provides advisory and administrative services to certain 
proprietary mutual funds and exchange-traded funds marketed under the Schwab Funds®, Laudus Funds® and 
Schwab ETFs™ names. CSIM also serves as a separate account manager in other Schwab wrap fee programs. 
Performance Technologies, Inc. (also known as Schwab Performance Technologies®) provides portfolio 
management software to independent registered investment advisors who custody assets at Schwab and also 
provides certain software and services used in the Program. 
 
Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading 
Code of Ethics 
Schwab has a code of ethics adopted pursuant to Rule 204A-1 under the Investment Advisers Act of 1940 (the 
“Code”). The Code reflects the fiduciary principles that govern the conduct of Schwab, its employees and agents, 
when we are acting as an investment advisor. 
 
The Code requires that Schwab’s covered representatives comply with applicable federal securities laws, report 
violations of the Code, and for those deemed “access persons” by virtue of providing investment advice or 
having access to certain related information, report their personal transactions and holdings in certain securities 
periodically and get clearance before buying certain securities, including initial public offerings or private 
offerings. The Code prohibits access persons from disclosing portfolio transactions or any other nonpublic 
information to anyone outside of Schwab, except as required to effect securities transactions for clients, or from 
using the information for personal profit or to cause others to profit. Access persons are also prohibited from 
engaging in deceptive conduct in connection with the purchase or sale of securities for client accounts. The Code 
is subject to change as necessary to remain current with regulatory requirements and internal business policies 
and procedures. 
 
A copy of the Code is available at intelligent.schwab.com. 
 
Participation or Interest in Client Transactions 
Order Routing and Trade Execution 
In arranging for the execution of non-directed orders for equities and listed options, Schwab seeks out industry-
leading execution services and access to the best-performing markets. Schwab routes orders for execution to 
unaffiliated broker-dealers, who may act as market maker or manage execution of the orders in other market 
venues, and also routes orders directly to major exchanges. Schwab considers a number of factors in evaluating 
execution quality among markets and firms, including execution price and opportunities for price improvement, 
17 
 
market depth and order size, the trading characteristics of the security, speed and accuracy of executions, the 
availability of efficient and reliable order handling systems, liquidity and automatic execution guarantees, the 
likelihood of execution when limit orders become marketable and service levels and the cost of executing orders 
at a particular market or firm. Price improvement occurs when an order is executed at a price more favorable 
than the displayed national best bid or offer. Schwab regularly monitors the execution quality obtained to 
ensure orders are routed to market venues that have provided high quality executions over time. 
Schwab receives remuneration, such as liquidity or order flow rebates, from market venues to which orders are 
routed, and also pays fees for execution of certain orders. Quarterly information regarding the market venues to 
which we route orders and remuneration received is available on our website at www.schwab.com or in written 
form upon request. 
 
Information regarding the specific routing destination and execution time of your orders for up to a six-month 
period is also available upon request. Schwab may execute fixed income orders for customers as agent or as 
principal for our own account. In the bond market, there is no centralized exchange or quotation service for 
most fixed income products. Prices generally reflect activity by market participants or dealers linked to various 
trading systems. A small number of corporate bonds are listed on national exchanges. Although Schwab seeks 
access to major trading systems, exchanges, and dealer markets in an effort to obtain competitive pricing, at any 
given time it is possible that securities could be available through other trading systems, exchanges, or dealers 
at superior or inferior prices compared to those available at Schwab. All prices are subject to change without 
prior notice. 
 
ETFs 
The ETFs that are eligible for inclusion in the Program are described above under “Selection of ETFs.” 
Each ETF pays investment advisory, administrative, distribution, transfer agent, custodial, legal, audit, and other 
customary fees and expenses, as set forth in the ETF prospectus. An ETF pays these fees and expenses, which 
ultimately are borne by its shareholders. Therefore, CSIM (a Schwab affiliate) will earn fees from Schwab ETFs 
that are held in Program accounts. 
 
ETFs in the ETF OneSource program are also eligible to be selected for inclusion in the Program. Schwab has 
established the ETF OneSource program under which ETFs can be traded without a commission on buy and sell 
transactions. Schwab receives payments from the third-party ETF sponsors or their affiliates participating in ETF 
OneSource for recordkeeping, shareholder services and other administrative services that Schwab provides to 
participating ETFs. In addition, Schwab promotes the ETF OneSource program to its customers, and a portion of 
the fees paid to Schwab offsets some or all of Schwab’s costs of promoting and administering ETF OneSource. 
Schwab does not receive payment to promote any particular ETF to its customers. 
 
ETF sponsors or their affiliates pay a fixed ETF OneSource program fee to Schwab each year for each ETF 
participating in ETF OneSource. The program fees vary, but can range up to $15,000 per year for each 
participating ETF. ETF sponsors or their affiliates also pay Schwab an asset-based fee based on a percentage of 
total ETF assets purchased by Schwab customers after the ETF was added to ETF OneSource. 
The amount of the asset-based fee can range up to 0.04% annually. Schwab ETFs do not pay any program or 
asset-based fees to participate in ETF OneSource. 
 
Assets in Program accounts are included in the calculation of the asset-based ETF OneSource fee to be paid to 
Schwab by an ETF sponsor or its affiliates. Schwab may exclude other assets or other types of transactions from 
the asset-based ETF OneSource fee paid by an ETF sponsor or its affiliates. 
 
Personal Trading 
18 
 
Schwab monitors the personal securities holdings and trading of Schwab representatives. Schwab reviews 
accounts of its representatives custodied at Schwab and applicable accounts custodied at other firms. The 
surveillance program monitors holdings and trades against the Code and other applicable policies. Additionally, 
Schwab representatives must disclose all securities accounts they own or control after their hire date and review 
and confirm the accuracy of those accounts on an annual basis during their employment. 
 
Brokerage Practices 
Schwab does not select or recommend broker-dealers as part of the SIP Program. Clients agree with Schwab 
that all brokerage transactions for the SIP Program will be routed to Schwab for execution. For additional details 
regarding brokerage practices for the SIP Program, please refer to the CSIA Schwab Intelligent Portfolios® 
Disclosure Brochure. 
 
Review of Accounts 
Schwab will contact Program clients at least once a year via electronic channels to ask them to update their 
information on the Program Website if there have been any material changes. Clients who have experienced 
material changes to their goals, financial circumstances or investment objectives, or who wish to impose or 
modify restrictions on the management of their Program accounts, should promptly update their information on 
the Program Website. Schwab will not change a client’s portfolio selection unless the client updates their 
investment profile through the Program Website. 
 
Program clients receive electronically a separate confirmation of each transaction and an account statement (at 
least quarterly) detailing positions and activity in their accounts. The statement includes a summary of all 
transactions made on the client’s behalf, all contributions and withdrawals made to or from the account, all fees 
and expenses charged to the account, and the account value at the beginning and end of the period. The 
statement may be based upon information obtained from third parties. 
 
Client Referrals and Other Compensation 
Schwab FCs and other employees, as well as IBLs and IB Representatives, receive compensation from Schwab as 
explained in the “Compensation” section above. The SIP Program does not rely upon client referrals from any 
non-Schwab entity or person.  
 
Custody 
Schwab has custody of assets in the SIP Program accounts and will provide an account statement, at least 
quarterly, for each account. The account statements detail account positions and activities during the preceding 
period. Clients should review their account statements carefully. 
 
Investment Discretion 
The SIP Program consists of discretionary portfolio management through a diversified portfolio of ETFs and a 
Cash Allocation. 
 
Voting Client Securities 
Schwab does not have or accept authority to vote Clients’ securities (i.e., proxy voting) in the SIP Program. 
 
Financial Information 
Schwab does not require or solicit prepayment of an advisory fee for the Program and is therefore not required 
to include a balance sheet for its most recent fiscal year. Schwab is not the subject of any financial condition that 
is reasonably likely to impair its ability to meet its contractual obligations to its clients. Schwab is not the subject 
19 
 
of any bankruptcy petition, nor has it been the subject of any bankruptcy petition at any time during the past 10 
years. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
©2018 Charles Schwab & Co., Inc. All rights reserved. (1118-8S3N) REG83246-05 (11/18)  
 
This brochure provides information about the qualifications and business practices of Charles Schwab Investment Advisory, Inc. (CSIA or 
“Adviser”) as an adviser for the above mentioned strategies. If you have any questions about the contents of this brochure, please contact us 
at the phone number above. The information in this brochure has not been approved or verified by the United States Securities and Exchange 
Commission or by any state securities authority. CSIA’s description of itself in this brochure as a registered investment adviser with the SEC 
does not imply a certain level of skill or training on the part of CSIA or its representatives.
Additional information about CSIA is also available on the SEC’s website at www.adviserinfo.sec.gov.
November 30, 2018
Charles Schwab Investment Advisory, Inc.  
Schwab Intelligent Portfolios® 
Disclosure Brochure
Charles Schwab Investment Advisory, Inc. 
211 Main Street 
San Francisco, CA 94105 
Tel: (415) 667-1910
Contents
Advisory Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Fees and Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Performance-Based Fees and Side-by-Side Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Types of Clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Methods of Analysis, Investment Strategies, and Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Disciplinary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other Financial Industry Activities and Affiliations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Brokerage Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Review of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Client Referrals and Other Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other Broker/Custodian-Related Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Custody . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Investment Discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Voting Client Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1
Advisory Business
Charles Schwab Investment Advisory, Inc. (“CSIA”) is a wholly 
owned subsidiary of The Charles Schwab Corporation 
(“CSCorp”), a Delaware corporation that is publicly traded and 
listed on the New York Stock Exchange. CSIA is an affiliate of 
Charles Schwab & Co., Inc. (“Schwab”). As of April 1, 2018, 
Windhaven Investment Management, Inc. and ThomasPartners, 
Inc. merged into, and became divisions of, CSIA. In anticipation 
of this merger, on March 30, 2018, CSIA incorporated the 
existing ThomasPartners® and Windhaven® portfolio manage-
ment teams to manage the respective assets and assume 
fiduciary responsibility for the ThomasPartners and Windhaven 
Strategies formerly managed by this affiliated investment advi-
sor. CSIA has been registered as an investment advisor since 
November 5, 2009. Windhaven Investment Management, Inc. 
was founded in 2010 when CSCorp purchased the assets and 
intellectual property of Windward Investment Management, Inc., 
which had been registered as an investment adviser since April 
2000 (and registered as Windward Capital Inc. since October 
1994). ThomasPartners, Inc. was purchased by CSCorp in 
December 2012. Prior to this acquisition, ThomasPartners, Inc. 
traces its roots back to July 1970 under other names, including 
Shorey-Huntington; during a change in control in 2004, the firm 
adopted the ThomasPartners name.
This brochure relates to the portfolio management services that 
CSIA provides for the Schwab Intelligent Portfolios® program  
(the “SIP Program”). CSIA also manages portfolios for several other 
Strategies or Programs, including: Schwab Managed Portfolios™ 
(“SMP”), Windhaven Strategies, and ThomasPartners Strategies. 
The SIP Program offers clients a diversified portfolio composed of 
exchange-traded funds (“ETFs”) as well as an FDIC-insured cash 
allocation (the “Cash Allocation”) that is based on the client’s 
stated investment objectives and risk tolerance. The portfolio of 
ETFs includes up to 20 asset classes across stocks, fixed income, 
real estate, and commodities. The SIP Program is designed to 
monitor a client’s portfolio daily and will also automatically rebal-
ance as needed to keep a client’s portfolio consistent with their 
selected risk profile unless such rebalancing may not be in the 
best interest of the client.
The SIP Program is sponsored by CSIA’s affiliate, Schwab, which 
sets investment policy and parameters and also provides trade 
execution, custody, administrative and related services for the SIP 
Program as described below.
The SIP Program is also used to provide discretionary portfolio 
management in Schwab Intelligent Advisory® (the “SIA Program”) 
sponsored by Schwab. The SIA Program combines the SIP Program 
with additional financial planning services provided through 
Schwab. Unless otherwise noted, statements in this brochure 
about the SIP Program are equally applicable to discretionary 
portfolio management that occurs in accounts enrolled in the SIA 
Program. This brochure combined with the Schwab SIP disclosure 
brochure and the Schwab SIA disclosure brochure (collectively, “the 
SIP and SIA Brochures”) contain details about the SIP Program and 
SIA Program, including a description of the automated component 
(“Algorithm”) of the Program.
Schwab has chosen CSIA to provide portfolio management services 
to the SIP Program accounts on a discretionary basis consistent 
with investment policy and parameters developed by Schwab and 
with clients’ chosen investment strategy, and to direct appropriate 
trades in clients’ accounts. Schwab acts as the qualified custodian 
for SIP Program accounts and provides trade routing and/or execu-
tion and related services for SIP Program accounts. Some ETFs in 
the investment strategies are managed by Charles Schwab 
Investment Management, Inc. (CSIM), which is also an affiliate of 
Schwab and CSIA.
Schwab offers the SIP Program online through an interactive website 
and mobile application (collectively, the “SIP Program Website”). 
Clients use a web or mobile application to determine whether the 
SIP Program is appropriate for them and, if so, are asked a series of 
questions that the Algorithm uses to determine their investment risk 
profile, receive a recommended strategy, and select an investment 
strategy. Clients complete their investment profile online and are 
asked to carefully consider whether their participation in the SIP 
Program is appropriate for their investment needs and goals prior to 
enrollment in the Program. Clients can change their investment 
strategy by going online and completing a new web-based invest-
ment profile. Clients should periodically review their existing invest-
ment risk profile and update it when their goals, risk tolerance, or 
other aspects of their financial situation change.
Clients agree to accept electronic delivery of contracts, disclosure 
documents, prospectuses, statements, and other materials. More 
information about the SIP Program is available in the Schwab 
disclosure brochure provided to SIP Program clients.
The SIP Program website allows prospective clients to review infor-
mation about the SIP Program, including general information on the 
types of ETFs included, as well as information about CSIA’s 
approach to allocating client accounts.
Clients may also monitor their portfolio’s allocation and activity, 
monitor their account’s performance, and use a goal tracking tool to 
monitor whether their account is on target to reach their savings or 
income goal. Clients may also initiate deposits and withdrawals from 
existing SIP Program accounts or open new SIP Program accounts. 
The investment strategies employed in each SIP Program account 
are governed by a client’s agreement with Schwab.
In the SIA Program, clients respond to a series of planning-related 
questions through an interactive SIA website, and a Schwab 
Planning Consultant provides financial planning advice and recom-
mends an appropriate SIP Program investment strategy or strate-
gies. More information about the SIA Program is available in the 
Schwab disclosure brochure provided to SIA Program clients.
Clients may impose reasonable restrictions on the management of 
the account subject to acceptance by CSIA. See the “Investment 
Discretion” section of this document for details on potential invest-
ment restrictions.
In addition, upon the request of its affiliate Charles Schwab Trust 
Company (“CSTC”), CSIA may provide sub-advisory services to 
CSTC in connection with the management of trust assets.
CSIA offers several types of separately managed account strate-
gies and manages $68,811,781,090 on a discretionary basis as of 
12/31/2017. CSIA also manages $14,927,425 on a non-discretion-
ary basis as of 12/31/2017.
Fees and Compensation
Pursuant to an agreement between CSIA and Schwab, Schwab 
pays all costs and expenses incurred by CSIA in connection with 
the SIP Program and other services provided by CSIA to Schwab, 
plus an additional amount based on a fixed percentage of such 
costs and expenses. Schwab also provides CSIA with human 
resources, legal, compliance, and other administrative and techno-
logical support services. The portion of the costs and expenses 
paid by Schwab for the work done by CSIA may be adjusted by 
Schwab and CSIA from time to time as more or fewer resources 
are required. The SIP Portfolio Management Team serves as a 
2
portfolio manager in the SIP and SIA Managed Account Programs 
offered by Schwab. More specific information about the Managed 
Account Programs appears in Schwab’s Disclosure Brochures for 
those programs, which are provided to program clients. CSIA does 
not enter into agreements directly with Managed Account Program 
clients and so does not receive direct compensation from or nego-
tiate fees with them. Management fees may be discounted for 
Schwab employees.
Additional Costs
As further detailed in the Schwab SIP Brochure, clients are not 
charged an annual Program Fee; however, the SIP Program is not 
free of charge. Clients pay the operating expense ratio (“OER”) of 
ETFs used in the portfolios, including Schwab ETFs™, which affects 
the performance of SIP Program accounts. Account performance is 
also affected by the Cash Allocation and the Sweep Program 
(defined below). Schwab and its affiliates earn compensation from 
certain ETFs used in the portfolios and from the Cash Allocation 
and Sweep Program described in the Schwab disclosure brochure 
provided to SIP Program clients. Schwab will waive all of its trading 
commissions on SIP accounts managed by CSIA. Please note that 
Schwab’s waiver does not extend to any other non-Schwab broker 
fees, commissions, account fees, or expenses. Information relating 
to CSIA’s brokerage practices is included in the “Brokerage 
Practices” section of this document. 
ETFs held in SIP portfolios are subject to operating expenses and 
fees as set forth in the prospectuses of the funds. These fees and 
expenses are paid by the funds but ultimately are borne by clients 
as fund shareholders. CSIA may also provide access to certain 
ETFs, mutual funds, or classes of funds that a client might nor-
mally not be qualified to purchase. If an account leaves, these 
investments may be liquidated or exchanged for the share class 
corresponding to the size of the client’s individual investment in 
the fund.
Compensation Earned by CSIA Affiliates
Schwab and its affiliates may receive an investment management 
fee for managing an affiliated ETF or mutual fund, or other forms of 
compensation in connection with the operation and/or sale of 
shares of affiliated or unaffiliated ETFs or mutual funds, to the 
extent permitted by applicable law. 
As detailed below in “Methods of Analysis, Investment Strategies, 
and Risk of Loss,” Charles Schwab Bank (“Schwab Bank”) earns 
income on cash balances participating in the Schwab Intelligent 
Portfolios® Sweep Program (“Sweep Program”), which presents a 
conflict of interest. Additional details regarding the Sweep Program 
can be found in the Schwab Intelligent Portfolios Sweep Program 
Disclosure Statement and the Schwab SIP Disclosure Brochure.
These conflicts of interest regarding affiliate compensation are 
mitigated by the fact that, subject to the Parameters defined below, 
the CSIA investment decision-making process is independent of 
and separate from Schwab, Schwab Bank, and CSIM.
Performance-Based Fees and Side-by-Side 
Management
CSIA does not receive or charge any performance-based fees.
Types of Clients
Pursuant to the enrollment criteria established by Schwab, clients 
of the SIP Program primarily include individuals, revocable living 
trusts, and individual retirement accounts (“IRAs”). Government 
entities and accounts that are subject to the Employee Retirement 
Income Security Act of 1974 (“ERISA”), as amended, are not eli-
gible for the SIP Program.
To be initially invested in an investment strategy, SIP clients must 
meet all requirements of Schwab to open their SIP Program 
account and fund it with a minimum of $5,000. There is also a 
minimum balance requirement to employ a tax-loss harvesting 
strategy, and a minimum balance requirement to maintain a tax-
loss harvesting strategy.
Schwab may terminate a client from the SIP Program for failing to 
fund their account with the required minimum, for withdrawing cash 
from their account that brings their account balance below the 
minimum, for failure to maintain a valid email address, or for any 
other reason, in Schwab’s sole discretion. Upon unenrollment from 
the SIP Program, the client’s enrollment in the Schwab Intelligent 
Portfolios Sweep Program will terminate and the account will no 
longer be managed.
Methods of Analysis, Investment Strategies, 
and Risk of Loss
Pursuant to written investment policy and parameters provided by 
Schwab (the “Parameters”), CSIA has created a number of invest-
ment strategies for the SIP Program that consist of diversified 
portfolios of ETFs combined with the Cash Allocation in a single 
account. The Cash Allocation is an allocation to the Sweep 
Program. Each investment strategy is designed to be consistent 
with a certain combination of investment return objectives and risk 
tolerances. Certain strategies are intended for taxable accounts 
and others for tax-deferred accounts. Certain strategies are 
intended for clients who are looking for a level of income genera-
tion. Upon request from Schwab, CSIA may add, remove, or change 
investment strategies used in the SIP Program.
Schwab sets the Parameters for the Cash Allocation for each invest-
ment strategy. These Parameters are set based on a disciplined 
portfolio construction methodology designed to balance perfor-
mance with risk management appropriate for a client’s goal, invest-
ing time frame, and personal risk tolerance, just as with other 
Schwab managed products. Schwab Bank earns income on the 
Cash Allocation for each investment strategy. The higher the Cash 
Allocation and the lower the interest rate paid, the more Schwab 
Bank earns, thereby creating a conflict of interest for Schwab and 
for CSIA. The Cash Allocation can affect both the risk profile and 
performance of a portfolio. To mitigate any conflict, Schwab 
instructs CSIA to construct the SIP Program strategies consistent 
with the Parameters. More information about the Selection of ETFs, 
Cash Allocation, Sweep Program, and Conflicts of Interest and How 
They Are Addressed can be found in the Schwab disclosure bro-
chure, as well as the Schwab Intelligent Portfolios Sweep Program 
Disclosure Statement provided to SIP Program clients. 
The written Parameters established by Schwab place limitations on 
the universe of ETFs that CSIA may select for the SIP Program. 
Schwab has ETF selection parameters designed to support its 
philosophy of low-cost and index-based investing. In support of 
providing broadly diversified and risk-adjusted portfolios, eligible 
ETFs must represent well a particular asset class in the portfolio, 
meet sufficient liquidity standards and be among the lowest cost 
(in terms of the OER) in their asset class or category. When it 
comes to replacing an ETF, CSIA also considers the potential 
3
impact to clients such as additional trading costs or other costs. 
Eligible ETFs include Schwab ETFs™, which are managed by CSIM, 
which is an affiliate of Schwab and CSIA. Schwab ETFs pay fees to 
CSIM that are described in “Participation or Interest in Client 
Transactions” below. Schwab has instructed CSIA to select or 
retain Schwab ETFs in the portfolios as long as CSIA determines 
they satisfy the above factors.
CSIA will generally select both a primary and secondary ETF for each 
asset class in consideration of, among other things, tax-loss har-
vesting and requested investment restrictions. In limited circum-
stances, as determined by CSIA, only one ETF may be used in 
certain asset classes. In such cases, the tax-loss harvesting feature 
would not be available for execution in the affected asset class(es). 
To be eligible for consideration, ETFs designated as the primary ETF 
in an asset class must have a share price less than a cap that is 
necessary to enable trading in smaller balance accounts.
CSIA receives a broad range of research from a wide variety of 
sources that include Schwab-affiliated entities, other brokers, and 
independent research providers, including issuers and trading 
partners. CSIA may use written reports prepared by recognized 
analysts who are specialists in the industry and may use computer-
based models to assist in portfolio management. CSIA may also 
use statistical and other information published by third-party data 
providers, industry, and government; information gathered at meet-
ings of professionals within the industry; and its own research of 
investment trends.
CSIA creates diversified portfolios of ETFs combined with a cash 
investment in a single account several Programs or Portfolios/
Strategies, such as Schwab Managed Portfolios™ – ETFs, 
Windhaven® Strategies, and Schwab Intelligent Portfolios®. In addi-
tion, CSIA also provides portfolio management for ThomasPartners® 
Strategies, which invests primarily in dividend-paying stocks, fixed 
income securities, and fixed income ETFs. The parameters for 
asset allocation for each differ from the others. There may be 
times when clients in different Programs or Portfolios/Strategies 
are investing in the same ETF; however, each Program or Portfolio/
Strategy has a separate portfolio management team making trad-
ing and investing decisions.
General Risks
Risk of Loss
There are inherent risks to investing in Schwab Intelligent 
Portfolios, including, but not limited to:
Management Risks
CSIA applies its investment techniques and risk analyses in mak-
ing investment decisions or recommendations for its clients, but 
there can be no guarantee that they will produce the desired 
results. In addition, there is no guarantee that a strategy based on 
historical information will produce the desired results in the future, 
and if market dynamics change, the effectiveness of the strategy 
may be limited. Each strategy runs the risk that investment tech-
niques will fail to produce the desired results. There also can be 
no assurance that all of the key personnel will continue to be 
associated with the firm for any length of time.
Investment Risks
Investments in securities, including ETFs and mutual funds and the 
securities that they in turn invest in, involve various risks, including 
those summarized below. In addition, each ETF and mutual fund 
has its own investment style, which may involve risks different 
from those described below. Clients and prospective clients should 
be aware that investing in securities involves risk of loss that 
clients should be prepared to bear.
Model Risks
Schwab Intelligent Portfolios may use quantitative analyses and/or 
models. Any imperfections, limitations, or inaccuracies in its analy-
ses and/or models could affect its ability to implement strategies. 
By necessity, these tools make simplifying assumptions that may 
limit their effectiveness. Models that appear to explain prior mar-
ket data can fail to predict future market events. Further, the data 
used in models may be inaccurate, and/or it may not include the 
most current information available.
Algorithm Risks
There are limitations inherent in the use of an Algorithm to manage 
Program accounts; for instance, the Algorithm is designed to man-
age Program accounts according to the asset allocation selected 
for that account and is not designed to actively manage asset 
allocations based on short-term market fluctuations. The Algorithm 
is also not designed to consider certain factors such as short-term 
asset class volatility or individual tax circumstances such as capi-
tal gains taxes; rather, its functions consist of proposing a portfo-
lio based on a client’s answers to the online questionnaire, 
identifying opportunities for tax-loss harvesting and rebalancing, 
and initiating buy/sell orders accordingly. Investment advisory 
personnel of CSIA oversee the Algorithm but do not personally or 
directly monitor each individual Program account.
There is also a risk that the Algorithm and related software used in 
the Program for strategy selection, tax-loss harvesting and rebalanc-
ing, and related functions may not perform within intended param-
eters, which may result in a recommendation of a portfolio that may 
be more aggressive or conservative than necessary, and trigger or 
fail to initiate rebalancing and/or tax-loss harvesting trading.
ETF General Risks
ETFs in which the strategy may invest involve certain inherent risks 
generally associated with investments in a portfolio of securities, 
including the risk that the general level of security prices may 
decline, thereby adversely affecting the value of each unit of the 
ETF. Moreover, an ETF may not fully replicate the performance of 
its benchmark index because of the temporary unavailability of 
certain securities in the secondary market or discrepancies 
between the ETF and the benchmark index with respect to the 
weighting of securities or the number of securities held.
Investing in ETFs carries the risk of capital loss. ETFs are not 
guaranteed or insured by the FDIC or any other government agency. 
You can lose money investing in ETFs. ETFs in which the strategies 
invest have their own fees and expenses as set forth in the ETF 
prospectuses. These fees and expenses lower investment returns. 
Although ETFs themselves are generally classified as equities, the 
underlying holdings of ETFs can include a variety of asset classes, 
including but not limited to equities, bonds, foreign currencies, 
physical commodities, and derivatives. A full disclosure of the 
specific risks of ETFs is located in the respective prospectus of 
each fund.
ETFs may have exposure to derivative instruments, such as futures 
contracts, forward contracts, options, and swaps. There is a risk 
that a derivative may not perform as expected. The main risk with 
derivatives is that some types can amplify a gain or loss, poten-
tially earning or losing substantially more money than the actual 
cost of the derivative, or that the counterparty may fail to honor its 
contract terms, causing a loss for the ETF. Use of these instru-
ments may also involve certain costs and risks, such as liquidity 
4
risk, interest rate risk, market risk, credit risk, management risk, 
and the risk that an ETF could not close out a position when it 
would be most advantageous to do so.
Market/Systemic Risks
Equity and fixed income and other global capital markets rise and 
fall daily. The performance of client investments is, to varying 
degrees, tied to these markets. When markets fall, the value of a 
client’s investments will fluctuate, which means a client could  
lose money.
Asset Allocation/Strategy/Diversification Risks
The asset allocation decisions can result in more portfolio concen-
tration in a certain asset class or classes, which could reduce 
overall return if the concentrated assets underperform expecta-
tions. The more aggressive the investment strategy selected, the 
more likely the portfolio will contain larger weights in riskier asset 
classes, such as equities. The asset classes in which an invest-
ment strategy in the SIP Program seeks investment exposure can 
perform differently from each other at any given time (as well as 
over the long term), so the investment strategy will be affected by 
its allocation among the various asset classes. Depending on 
market conditions, there may be times where diversified portfolios 
perform worse than less diversified portfolios.
Geographic Concentration Risk
Portfolios concentrated in any one geographic region can be more 
susceptible to that region’s political and economic risk. For exam-
ple, a portfolio that is concentrated in the United States will be 
more susceptible to the United States’ political and economic risk, 
as compared to a more globally diversified portfolio.
Trading/Liquidity Risks
A particular ETF may be difficult to purchase or sell or may become 
difficult to sell after being purchased for a client account. CSIA may 
be unable to sell ETFs on behalf of a client at an advantageous 
time and/or price due to then-existing trading market conditions.
Large Investment Risks
Clients may collectively account for a large portion of the assets in 
certain ETFs. A decision by CSIA to buy or sell some or all of a par-
ticular ETF or mutual fund where clients hold a significant portion of 
such may negatively impact the value of that security.
Counterparty Risks
There may be a risk of an executing broker failing to deliver securi-
ties, especially due to the large volume of step-out transactions for 
the Windhaven® and ThomasPartners® Strategies. This may result in 
a loss to the client. CSIA, working with Schwab, will attempt to miti-
gate trading counterparty risk through its broker selection program 
included in “Brokerage Practices.”
ETFs may have some “product” or “structural” risk associated  
with underlying derivatives, as they will sometimes provide market 
exposure through indirect means, like futures, options, and for-
wards contracts.
Custodian Risks
Schwab is a Securities Investor Protection Corporation (“SIPC”) 
member brokerage firm and maintains SIPC protection. SIPC offers 
protection of up to $500,000, including a $250,000 limit for cash, if 
a member brokerage firm fails. SIPC covers most securities, such as 
stocks, bonds, ETFs, and mutual funds, but does not protect against 
market loss. 
Tax Risks
The Program is not designed to address specific tax objectives.  
There is no guarantee that the tax-loss harvesting strategy in the 
Program will reduce, defer or eliminate the tax liability generated by a 
client’s investment portfolio in any given tax year. Also, gains and 
losses associated with some commodities may be taxed differently 
than standard short-term and long-term capital gains and losses. 
Clients should consult a professional tax advisor for help with their 
unique situations.
Underlying Securities Risks
Equity-Related Risks
General Risks
The prices of equity securities, and thus the value of ETFs or 
mutual funds that invest in them, will rise and fall. These price 
movements may result from factors affecting individual companies, 
industries, or the securities market as a whole. Individual compa-
nies may report poor results or be negatively affected by industry 
and/or economic trends and developments. The prices of securi-
ties issued by such companies may suffer a decline, in response. 
In addition, the equity market tends to move in cycles, which may 
cause stock prices to fall over short or extended periods of time.
Large- and Mid-Cap Risks
Large- and/or mid-cap U.S. stocks, along with mutual funds and 
ETFs that focus on large- and/or mid-cap segments of the stock 
market, bear the risk that these types of stocks tend to go in and 
out of favor based on market and economic conditions. However, 
stocks of mid-cap companies tend to be more volatile than those 
of large-cap companies because mid-cap companies tend to be 
more susceptible to adverse business or economic events than 
larger, more established companies. During a period when large- 
and mid-cap U.S. stocks fall behind other types of investments— 
bonds or small-cap stocks, for instance—the performance of 
investment strategies focused on large- and/or mid-cap stocks will 
lag the performance of these other investments.
Small-Cap and International Risks
Historically, small-cap and international stocks have been riskier 
than large- and mid-cap U.S. stocks (see the “Foreign Investment–
Related Risks” section below for additional information). During a 
period when small-cap and/or international stocks fall behind other 
types of investments—U.S. large- and mid-cap stocks, for 
instance—the performance of investment strategies focused on 
small-cap or international stocks may lag the performance of these 
other investments.
Fixed Income–Related Risks
General Risks
Bond markets rise and fall daily, and fixed income investments, 
which generally also include instruments with variable or floating 
rates, are subject to various risks. As with any investment whose 
performance is tied to bond markets, the value of a fixed income 
investment, ETF, or mutual fund will fluctuate, which means that 
the client could lose money.
Interest Rate Risks
When interest rates rise, bond prices usually fall, and with them 
the value of an ETF or mutual fund holding the bonds. A decline in 
interest rates generally raises bond prices, and with them poten-
tially the value of a bond fund or ETF share, but could also hurt the 
performance of an ETF or mutual fund by lowering its yield (which