After First Year, Schwab’s Index-Based 401(k) Offering Cuts Investment Costs by 77%, Delivering on Low-Cost Goal

87% of Workers in Schwab Index Advantage® Also Receiving Low-cost Personalized Independent Savings and Investment Advice

Thursday, February 21, 2013 5:30 am PST

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SAN FRANCISCO
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SCHW
"Highest in Investor Satisfaction With Self-Directed Services"

SAN FRANCISCO--(BUSINESS WIRE)--Schwab Retirement Plan Services, a Top 10 401(k) provider* to approximately 1.6 million workers saving through company retirement plans, today announced first-year results for Schwab Index Advantage, a one-of-a-kind 401(k) plan offer designed to lower fund investment costs, simplify investing and help workers better prepare for retirement.

“Last year we launched Schwab Index Advantage with the goal of stripping out unnecessary cost and complexity to help workers save more for retirement,” said Steve Anderson, executive vice president of Schwab Retirement Plan Services. “Today, we are seeing the effective implementation of this new breed of 401(k) plan through sharply lower investment expenses and markedly higher rates of advice usage. We believe this is the right combination for success.”

Lower Investment Costs, Higher Advice Usage

Schwab Index Advantage integrates 401(k) features in a unique way to help workers save and invest for retirement. To help drive costs down, Schwab Index Advantage includes index mutual funds with low operating expenses instead of the often more expensive actively-managed mutual funds found in many 401(k) plans. Focusing on simplicity, the program includes a professional, low-cost, independent advice service that develops an ongoing personalized savings and investment strategy for individuals.

Workers enrolled in Schwab Index Advantage have seen the weighted average operating expense ratio (OER) for investments in their 401(k) plans fall 77 percent to $14.78 per $10,000 invested because the plans now use index mutual funds. Prior to transitioning to Schwab Index Advantage, the weighted average OER for these same plans was $65.11 per $10,000 invested.** “Investment costs are significantly lower in these plans, which can positively impact the amount individuals can accumulate during their career,” Anderson said.

In addition, nearly 90 percent of workers in Schwab Index Advantage plans are receiving low-cost, professional, third-party advice to help manage their 401(k) investments. Prior to the transition, only about four percent of these same workers elected to receive advice.+ “A year ago we predicted this new approach would dramatically increase the number of individuals receiving advice, and we are gratified to see such high usage rates. We believe advice plays a critical role in helping people effectively save and invest for retirement,” Anderson said.

When a plan transitions to Schwab Index Advantage, employees are automatically enrolled in the advice service and receive ongoing, specific savings recommendations and investment management services through an independent, third party provider based on a variety of factors, including their age, income, account balance and 401(k) savings rate.++ Employees who prefer to manage their account themselves can do so at any time. Prior to Schwab Index Advantage, if an employee’s 401(k) plan offered advice, it was the employee’s responsibility to proactively elect to receive the advice.

Schwab data shows that employees who have chosen to use independent, professional, point-in-time 401(k) advice services in the past have tended to save twice as much, were better diversified and stuck to their long-term plan, even in the most volatile market environments.+

Schwab Index Advantage Gains Adoption

One year after its launch, Schwab Index Advantage has already been selected by 50 employer-sponsored 401(k) plans with more than $4 billion in assets and more than 36,000 individual participants. “We are very pleased with the growth of Schwab Index Advantage, especially given the typical six- to 12-month evaluation process employers in our market segments undertake when they select new 401(k) services,” Anderson said.

Schwab Index Advantage is available to employers with retirement plan assets of $20 million or higher. A broad range of employers have selected Schwab Index Advantage, including manufacturing, healthcare, legal, professional and financial services firms.

Next: ETFs in Schwab Index Advantage

Schwab is also developing a version of Schwab Index Advantage that will provide only index-based exchange-traded funds (ETFs) in the investment lineup so employers will ultimately have a choice – index mutual funds or ETFs. Schwab expects to launch the ETF version of Schwab Index Advantage later this year.

“Fund operating expenses for index ETFs are often lower than those of index mutual funds. We believe integrating ETFs into a 401(k) lineup can drive costs down further and provide workers with the opportunity to save even more for retirement,” Anderson said.

Employers interested in learning more about Schwab Index Advantage should visit rethinkyour401k.com or call Schwab at 877-223-7036.

Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges and expenses. You can request a prospectus by calling Schwab at 800-435-4000. Please read the prospectus carefully before investing.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 300 offices and 8.8 million client brokerage accounts, 1.6 million corporate retirement plan participants, 874,000 banking accounts, and $2.01 trillion in client assets as of January 31, 2013. The company was ranked "Highest in Investor Satisfaction With Self-Directed Services" in the 2012 US Self-Directed Investor Satisfaction StudySM from J.D Power and Associates. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com. 0213-1624

Schwab Retirement Plan Services is comprised of Schwab Retirement Plan Services, Inc. and Schwab Retirement Plan Services Company, which provide recordkeeping and related services with respect to retirement plans. Schwab Retirement Plan Services, Inc., Schwab Retirement Plan Services Company, Charles Schwab Bank, and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Brokerage products and services are offered by Charles Schwab & Co., Inc. Trust, custody and deposit products and services are available through Charles Schwab Bank.

*Top 10 ranking by total 401(k) recordkeeping assets. PLANSPONSOR 2012 Recordkeeping Survey, June 2012.

**Fund operating expenses represent the total of all a mutual fund's annual fund operating expenses. Management fees are one component of the fund operating expenses. Index funds generally have low management fees because they don't have to pay investment managers to actively manage underlying investments. Weighted Average Operating Expense Ratio (OER) is calculated based on the core investment menus of plans that transitioned to Schwab Index Advantage as of 1/31/2013 and does not include assets in Schwab Bank Savings, Schwab Personal Choice Retirement Account®, and frozen investment funds including Stable Value Fund balances. Schwab Bank Savings is a money market deposit account ("MMDA") at Charles Schwab Bank ("Schwab Bank"). A MMDA is a type of savings deposit. Schwab Bank Savings is only available in select retirement plans serviced by Schwab Retirement Plan Services, Inc.

+Advice data based on plans serviced by Schwab Retirement Plan Services, Inc. that offer independent point-in-time advice at no additional cost to their participants through GuidedChoice.

++The savings and investment service provides participants with a retirement savings and investment strategy, a major component of which is a discretionary investment management service furnished by GuidedChoice Asset Management, Inc. ("GuidedChoice®"), an independent investment advisor. GuidedChoice creates discretionary managed portfolios based on Modern Portfolio Theory using investment alternatives available in the plan. GuidedChoice is not affiliated with or an agent of Schwab Retirement Plan Services, Inc. ("SRPS"), Charles Schwab & Co., Inc. ("CS & Co."), or their affiliates. Neither CS&Co., SRPS, nor their affiliates supervise, make recommendations with respect to, or take responsibility for monitoring the services provided to participants by GuidedChoice. Schwab Advice Consultants, who are employees of CS&Co. and not of GuidedChoice, facilitate participant access to the GuidedChoice services, but do not provide investment advice or recommendations regarding the GuidedChoice services or generally as part of the advice services. Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market. There is no guarantee a participant's savings and investment strategy will provide adequate income at or through retirement. Fees are charged for the advice services, including its discretionary investment management service, based on the participant's account balance. Participants should carefully consider information contained in the disclosure materials furnished at the employer's direction regarding the services provided by Schwab and GuidedChoice, including information regarding compensation, affiliations, and potential conflicts.

Some of the statements may be forward looking and contain certain risks and uncertainties. There can be no guarantee of future performance. The views expressed are subject to change based on market and other various conditions.

Investment Products: Not FDIC Insured – No Bank Guarantee – May Lose Value

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© 2013 Schwab Retirement Plan Services, Inc., and/or its affiliates. All rights reserved.

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Steve Anderson, Executive Vice President of Schwab Retirement Plan Services (Photo: Business Wire)
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