The Truth About Investment-Fee Rebates

What single women need to know about managing their money
March 16, 2016
The New Money Rule That Helps You But Wall Street Hates
April 8, 2016

Who’s that Man, Daddy?

You’ve seen those Schwab commercials on TV where the dad explains to his child what his broker does. These ads are promoting a ‘money-back’ guarantee if clients aren’t happy with the advice. I just wrote an article published in Bottom Line Personal today explaining how that guarantee works.



A money-back guarantee might seem like an enticing assurance that a product or service is reliable. But when it comes to choosing an investment firm, it’s not very useful. Charles Schwab has been offering to refund investment advisory fees when investors are unhappy, and TD Ameritrade has been offering to rebate the fees after two quarters of negative performance. As I have traveled around the country, some investors have expressed excitement to me over these offers.

The problem: Many investors mistakenly believe that they will get better advice because of the offers and will be protected from investment losses. The guarantees are not a good reason to select a particular brokerage or a useful way to judge the value of the help you get.

How the offers work: Schwab’s ­“Accountability Guarantee” allows customers who use any of five advisory services to request a refund of fees for the previous quarter for any reason. The services include Schwab Managed Portfolios, whose model portfolios of mutual funds and exchange-traded funds (ETFs) are selected with the help of an adviser (minimum investment $25,000), and Schwab Private Client, which provides an adviser who creates a portfolio tailored for you (minimum investment $500,000). Annual fees are 0.9% of your managed assets or lower.

TD Ameritrade’s “Discretionary Service Fee Rebate” applies to its Amerivest service, which provides an adviser to help you select among several model portfolios. If your holdings experience two consecutive quarters of negative returns, Amerivest will automatically refund the fees from both quarters. Amerivest requires a $25,000 minimum investment and charges an annual fee of up to 1.25% of managed assets. The guarantees do not reimburse investment losses.

My take: Schwab and TD Ameritrade are worried about losing clients to much-lower-cost services known as robo-advisers offered by firms ranging from online newcomers to giants such as Vanguard and Schwab itself. Robo-­advisers generally charge 0.35% or less to generate model porfolios of ETFs—­although most won’t put you in touch with a human adviser.

But a money-back guarantee is not helpful in choosing the best human adviser. It’s better to look for advisers with long, solid track records. And you should avoid judging their advice based on your portfolio’s returns from one quarter to the next.


  1. 88m6 says:

    Too many “American Greed” episodes where the Financial Advisors took millions and ran with the consumers holding an empty bag. One Burnie Maddoff is one too many. Shows that absolutely no one out there can have more fiduciary responsibility to me than I do to myself. I’d rather manage my own money.

    • Pam Krueger says:

      Hi Hameed,

      Good to hear from you, and I really appreciate your note. For years, on my TV series MoneyTrack, I was telling viewers they can learn to save, manage and invest their own money. I started in the wealth management business when I was 24. Everyone came to know me as the person who hates financial advisors (and I don’t even mean I hate the people) but hate the industry. But I do not hate all of them— I LOVE about 3% of them.

      A tiny percentage of this industry that pretends to be a profession are truly professional. In fact, I’m proud of them. It took me four years to hand select advisors across the country who I have personally vetted, and I never in a million years thought I’d ever recommend any advisors. I am and proudly recommending them because they lead with integrity and education and are not working for anyone but their clients.

      Who knew I’d be the one to say, yes, there really are some outstanding, talented advisors who are nerdy — never salesy and I love these guys.

      Call me anytime and I’ll chat with you about my vetting process any other questions.

      Warm regards,


  2. Jamie says:

    I don’t know man, I’ve been managing money for a while and I know clients think about fees. But I also know that Schwab can never know my clients the way I do. They can’t know their spending habits and how much to keep liquid, crap, the client won’t even admit that stuff to themselves. Schwab isn’t going to advise them when buying a car or a house, or talk them into a HELOC as opposed to putting their daughter’s wedding on a credit card. Yet, clients don’t think about this stuff, they think about fees. You have to remind them of what their risk tolerance actually is and what you do for them. It’s frustrating when a firm who doesn’t provide a tenth of the services I do, makes me (and my kind) look like greedy pigs. We know and care about our clients on a very personal level, yet they try to make us look like we only want the client’s money.

  3. Mike Claiborne says:

    Pam, I became an advisor in Feb 2016, so I am fairly new. When I studied and took the test, my studies said that I was taking the fiduciary role, not an option, and that reimbursement of fees was not allowed. Yet when I see advertisements I am seeing otherwise. This is very confusing.

    • Pam Krueger says:

      Hi Mike,

      Good point– they are technically not refunding ‘advice fees’ because they don’t offer advice. They’re are only rebating the ‘program fee’ from the previous quarter, and of course, other fees will still apply. As you probably suspect, it’s not any guarantee against loss but it is sort of clever gimmicky way to get consumers in the door. What I like is that it gets consumers like you thinking about fees! Maybe not such such a clever ad after all! 🙂

      • Dave says:

        Yeah… so I’m a 9/10 and I looked over the small print on the satisfaction guarantee ( and I read the brochure for Schwab Intelligent Advisory ( – and to flesh it out a bit more, the “program fee” is what they charge to be enrolled, but no part of it is “attributable to the discretionary management received through the SIP Program.”

        My take as a 9/10 is that they’re skirting the line real close. I don’t know how their chief compliance officer approved this. It’s the regulatory equivalent of Three Card Monte. It’s like when Michael Scott declared bankruptcy on The Office by just shouting “I declare bankruptcy!” Everything else in that brochure is standard boiler plate for a wrap fee – except the sentence saying it’s not a wrap fee. That’s not how it works. De facto, this is a guarantee against a loss.

        I wouldn’t be surprised if FINRA brings the hammer down in a few years – or every RIA in the country starts guaranteeing against a loss this way.

  4. Brian says:

    Same here, why is this practice not violating FINRA regs?

    • Pam Krueger says:


      That’s the million dollar question that has the whole industry up in arms. The DOL released its final rule in April 2016. The rule mandates financial professionals who service individual retirement accounts, including IRAs and 401(k) plans, to serve the “best interest” of the savers and disclose conflicts of interest. FINRA and all the brokerage and insurance industry lobbyists, of course, are fighting this. The rule’s now in limbo, but remember this: With or without a rule, consumers have all the power. They can choose a fiduciary advisor or not. It’s totally up to the consumer to get educated. This is why I limit the advisors on Wealthramp to only those willing to accept fiduciary responsibility, and put that in writing.

  5. Rick says:

    Excellent question from Doug. I am interested in your response.

  6. Doug says:

    Why is this not a violation of FINRA rules? It would seem to me that this would be sharing in loses and therefore be prohibited. How are they getting around FINRA 2150?

    • John Kuhlman says:

      They are not sharing in losses. They are rebating management/advisory fees for specific model portfolios approved and most likely designed by Schwab or possibly one of Schwab’s subadvisors.

  7. With held says:

    As an advisor for over 35 years I applaud the lower cost of robo advisors, etfs and others. The problem that plagues my industry is that a good advisor delivers significant value but we expect the fee on the investment aspect of our services to bear the entire cost of the relationship. A true, comprehensive advisor is not comparable to an asset allocation service like a robo advisor or a model portfolio. Estate planning, retirement planning, cash flow projection, risk tolerance determination, hand holding, insurance planning, education funding etc etc are not part of a model portfolio. My hope is that the industry will move toward disaggregation like is currently taking hold in the family office space. A good example would be an annual fee of 25 bps for model portfolios, 50 bps for custom portfolios, 35 basis points for wealth management or financial planning, 10 bps for cash management etc. This approach could help consumers get exactly what they need instead of making the mistake of thinking portfolio management fees are the only consideration.

  8. John Meyer says:

    I believe the father / son commercial is for Schwab which offers a refund for being “unhappy”. I have not seen the one from Ameritrade for refunds for negative performance. Will they increase your fees if you start to get multiple outperformance years?

    • Pam Krueger says:

      Dear John, It’s not a full refund of the fees anyway. They’re all just trying to get the transparency message out. And no, they’re not asking investors to pay more for delivering alpha which as you know, so few can consistently outperform. Robo’s have lowered the cost of investing down to almost zero. For consumers, it’s about the value the advisors bring to the table in terms of advice to keep them from losing money and overall ‘planning’ versus betting that any advisor can beat the market.

Leave a Reply

Your email address will not be published. Required fields are marked *