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Investors file class-action complaint against Charles Schwab over excess cash allocations

On Behalf of | Sep 17, 2021 | Investment Loss

Three investors have filed a class-action complaint against Charles Schwab for allegedly placing too much of their robo-advisor portfolios in cash positions, ThinkAdvisor reports.

Lauren Marie Barbiero, Kimberly Jo Lopez and William Kenneth Lopez, who held Schwab Intelligent Portfolios (SIP) accounts, accused the firm of violating its fiduciary duties by putting its own interests ahead of protecting its clients.

They said Charles Schwab Investment Advisory left clients overconcentrated in cash positions so that it could maximize its cash sweeps income. The complaint alleged that clients in the SIP program ended up paying hundreds of millions of dollars in unwarranted cash sweeps to Schwab, while missing out on large gains in the stock market amounting to over $500 million.

The investors cited an August report by research firm Backend Benchmarking, which estimated that investors in the Schwab robo-advisor program missed out on over $1 billion they would have gained had Schwab invested their cash allocations in the fixed income part of its portfolio.

The complaint was filed in federal court in the Northern District of California. It seeks restitution, disgorgement of ill-gotten profits, and other relief that may be deemed proper by the court. The plaintiffs are also asking that Schwab be enjoined from continuing the practices alleged in the complaint.

Charles Schwab had no comment on the case, saying it does not comment on active litigation.

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