Schwab Advisor Services (formerly called Schwab Institutional) is Schwab’s business serving independent investment advisory firms like us. They provide us and our clients with access to its institutional brokerage services – trading, custody, reporting and related services – many of which are not typically available to Schwab retail customers. Schwab also makes available various support services. Some of those services help us manage or administer our clients’ accounts while others help us manage and grow our business. Here is a more detailed description of Schwab’s support services:

Services that Benefit You. Schwab’s institutional brokerage services include access to a broad range of investment products, execution of securities transactions, and custody of client assets. The investment products available through Schwab include some to which we might not otherwise have access or that would require a significantly higher minimum initial investment by our clients. Schwab’s services described in this paragraph generally benefit you and your account.

Services that May Not Directly Benefit You. Schwab also makes available to us other products and services that benefit us but may not directly benefit you or your account. These products and services assist us in managing and administering our clients’ accounts. They include investment research, both Schwab’s own and that of third parties. We may use this research to service all or some substantial number of our clients’ accounts, including accounts not maintained at Schwab. In addition to investment research, Schwab also makes available software and other technology that:

• provide access to client account data (such as duplicate trade confirmations and account statements);
• facilitate trade execution and allocate aggregated trade orders for multiple client accounts;
• provide pricing and other market data;
• facilitate payment of our fees from our clients’ accounts; and
• assist with back-office functions, recordkeeping and client reporting.

Services that Generally Benefit Only Us. Schwab also offers other services intended to help us manage and further develop our business enterprise. These services include:

• educational conferences and events
• technology, compliance, legal, and business consulting;
• publications and conferences on practice management and business succession;
• access to employee benefits providers, human capital consultants and insurance providers; and
• marketing consulting and support.

Schwab may provide some of these services itself. In other cases, it will arrange for third-party vendors to provide the services to us. Schwab may also discount or waive its fees for some of these services or pay all or a part of a third party’s fees. Schwab may also provide us with other benefits such as occasional business entertainment of our personnel.

The availability of these services from Schwab benefits us because we do not have to produce or purchase them.  We don’t have to pay for Schwab’s services.  These services are not contingent upon us committing any specific amount of business to Schwab in trading commissions or assets in custody.  This creates an incentive to require that you maintain your account with Schwab, based on our interest in receiving Schwab’s services that benefit our business and Schwab’s payment for services for which we would otherwise have to pay rather than based on your interest in receiving the best value in custody services and the most favorable execution of your transactions. This is a conflict of interest. We believe, however, that our selection of Schwab as custodian and broker is in the best interests of our clients.  Our selection is primarily supported by the scope, quality, and price of Schwab’s services (see Item 12 – How Regency selects brokers/custodians) and not Schwab’s services that benefit only us.  

From time to time, trade errors may occur.  To correct trade errors, Regency will place a correcting trade with the broker-dealer that has custody of the account, issue a “Restorative Payment” to the account, or issue a check directly to the client to make the client whole.  If a correcting trade is placed, Schwab’s policy is to charge Regency for any net losses exceeding $100 when it is determined Regency is responsible for the error.  For net losses less than $100, Schwab will bear the loss to minimize and offset its administrative time and expense.  If a net investment gain results from the correcting trade, the net gain will remain in the client’s account unless the same error involved other client account(s) that should have received the gain, it is not permissible for the client to retain the gain, or the client decides to forego the gain (e.g. due to tax reasons).  If the net gain does not remain in the client’s account and Schwab is the custodian, Schwab will donate the amount of any net gain of $100 or more to charity. 

Clients that direct our firm to use a particular broker/dealer to execute all transactions are responsible for negotiating commission rates with the broker.  To the extent that clients direct brokerage and negotiate their own commission rates it is possible that such clients may have commission and brokerage arrangements that are more or less favorable than other clients.

On the infrequent occasions when we trade individual equities or individual fixed income securities for our clients, we do not aggregate such trades.