Schwab Plans Its Own Tax-Aware Long/Short Product, CEO Says

what happened

Charles Schwab is developing a proprietary long/short program aimed at tax-aware investing, Chairman and CEO Rick Wurster said on the company's third-quarter earnings call on Thursday, according to Seeking Alpha. Demand for such strategies has grown among wealthy investors looking to reduce their tax bills.

"I do expect us to have an offering," Wurster said, pointing to the firm's existing direct indexing business, which he said has delivered strong tax alpha for clients. He added that the product could be run efficiently from both a balance sheet and operational standpoint, and that more details would come on future calls. Earlier, Bloomberg News reported that Schwab was tightening limits on tax-aware long-short accounts as regulators scrutinize aggressive products; the minimum for some long-short separately managed accounts is rising from $1 million. Schwab shares fell 1.9% in early afternoon trading.

why it matters

For Schwab, which serves a large base of wealthy clients, an extended long/short offering would add a product beyond its direct indexing service. Investors will be watching how tighter account limits and regulatory scrutiny affect the timing of the planned rollout.

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