Enhance your tax planning conversations with Charles Schwab Bank
During tax season, when clients may worry about the possibility of an unexpected tax bill or have a known large tax obligation, they may be looking to you for solutions. Clients likely have several options ranging from paying with their savings, liquidating assets in their portfolio or borrowing. Each have costs and benefits to consider.
Using cash may be a simple way to address the tax bill, but that may impact future plans or other needs the funds were previously earmarked for. Selling invested assets to cover a tax liability is often accompanied by other considerations such as incurring possible future taxes from that sale, losing value of the underlying assets by selling in a down market or the opportunity cost of missing potential gains in the market. Loans come with interest expense and likely need to be quickly established and flexible in terms.
Consider a Pledged Asset Line® (PAL) to meet liquidity needs during tax season
A PAL is a securities-based line of credit that allows your clients to leverage the value of eligible assets in their investment portfolio as collateral for a secured line of credit. When using a PAL, keep in mind that available credit will adjust based on the real-time value of eligible pledged brokerage assets.
A Pledged Asset Line can be beneficial to your clients for a variety of reasons.
- Cost: There is no origination fee. No maintenance fee. No annual fees. No prepayment penalties. No early closure fee. No wire or check fees. In the case of late payments, clients may be assessed a $25 fee.
- Flexibility: The line can be accessed multiple ways including wire transfers, checks and online transfers.
- Control: Clients can determine when they borrow, how much they borrow, and how they repay the debt.
- Ease: You can initiate an application digitally for your clients online and monitor the status throughout the process.
In addition to helping with tax liabilities, there are many other ways clients may be able to use a PAL.
- Student loan financing
- Residential construction, bridge financing or rental property loans
- Business start-up or buy out loan
- Commercial real estate
- Marine and aviation financing
- Fine art financing
- Livestock and land purchase
- Estate loan
- Other Large Purchases or liquidity events
Whether their needs are anticipated months in advance or arise suddenly, a PAL may be an appealing choice as it offers the opportunity to address your client's liquidity needs, strengthen relationships and help retain assets under management.
What you can do next
- Explore how a Pledged Asset Line from Schwab Bank can help your clients. If you already work with Schwab, check out the Service Guide for how to get started.
- Curious about how Schwab helps RIAs? Wealth services, technology, and business support are just the beginning. Whether you're exploring independence or considering a custodian swap, we're here to help you take your next step.
Investment and Insurance Products: Not a Deposit • Not FDIC Insured • Not Insured by any Federal Government Agency • No Bank Guarantee • May Lose Value
This material is for registered investment advisor use only. This material may not be forwarded or made available, in part or in whole, to any party who is not a financial professional.
Investors should consider carefully information contained in the prospectus, or if available, the summary prospectus, including investment objectives, risks, charges and expenses. You can obtain a prospectus, or if available, a summary prospectus by visiting www.schwabassetmanagement.com/prospectus. Please read it carefully before investing.
The Pledged Asset Line is a demand line of credit provided by either Charles Schwab Bank, SSB, or Charles Schwab Premier Bank, SSB, (each, an Affiliated Bank and together, the Affiliated Banks). As a non-purpose line of credit, proceeds may not be used to purchase securities, pay down margin loans, or be deposited into any brokerage account.
into a Pledged Asset Line and pledging securities as collateral involves a high degree of risk. You are pledging securities, the value of which is affected by events outside your control. Market fluctuations may cause the value of your pledged assets to decline. In addition, the Affiliated Banks, in its sole discretion, will determine at any time the eligible collateral criteria and the loan value of collateral. The Pledged Asset Line is uncommitted and the Affiliated Banks may demand full repayment at any time for any reason or no reason. In addition, if the loan value of collateral is insufficient to satisfy the minimum credit facility size or to support the outstanding loans, the Affiliated Banks may demand immediate payment of all or any portion of the outstanding obligations, or require additional cash or securities be pledged; otherwise the Affiliated Banks may immediately sell some or all of the pledged securities without further notice to you, which may result in tax consequences.
A Pledged Asset Line requires a brokerage account ("the Pledged Account") at Charles Schwab & Co., Inc. and sufficient eligible collateral to support a minimum credit facility size of $100,000. The Affiliated Banks are not acting or registered as securities broker-dealers or investment advisors.
Pledged Asset Lines to be held individually, jointly by natural persons, or by revocable trusts are offered by Charles Schwab Bank, SSB. Pledged Asset Lines to be held by incorporated organizations, non-incorporated organizations, or irrevocable trusts (collectively "entities") are offered by Charles Schwab Premier Bank, SSB.
All loans are subject to credit and collateral approval. Before you decide to apply for a Pledged Asset Line, make sure you understand the risks.
The Charles Schwab Corporation provides a full range of brokerage, banking and financial advisory services through its operating subsidiaries. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (Member SIPC), offers investment services and products, including Schwab brokerage accounts. Its banking subsidiary, Charles Schwab Bank, SSB (Member FDIC and an Equal Housing Lender), provides deposit and lending services and products. Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons.