Charles Schwab was founded in 1971. It is based in San Francisco and is a bank and brokerage firm, offering solutions from normal everyday banking to advanced investment options. It ranks as both one of the biggest banks and one of the biggest brokerage firms in the country. Charles Schwab truly is an all-encompassing financial service firm in every sense, as they offer a 360-degree suite of services for businesses and individuals.

Who it’s best for

Charles Schwab has a specific small business 401(k) plan called the Index Advantage. The company designed the program specifically for small businesses as a way for them to take advantage of Schwab’s full suite of services at a lower cost. Index Advantage was also created to simplify the investing process in hopes of making it easier for employees to prepare for retirement. It’s a great fit for small businesses and could be a good marketing tool for firms to attract high-end talent to their companies.

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Investment options

As a large investment firm, Charles Schwab’s 401(k) investment options run the gamut. The Index Advantage plan relies mostly on index mutual funds or ETFs. The company went this route with its investment options because they often have lower operating expenses than actively managed mutual funds.

Setup/plan administration

Charles Schwab’s Index Advantage 401(k) plan is a fully managed plan that the company offers. In addition to offering hands-on and ongoing support to plan sponsors, the company offers managed account services to employees who participate in the plan as well. Plan sponsors get to select a lineup of index mutual funds or ETFs for their 401(k) plan, and Schwab will manage the plan from there. Schwab’s plan also includes an automatic opt-in, so employees are automatically enrolled and have to opt out manually, instead of the other way around.

Administrative costs

Charles Schwab says that the costs of their Index Advantage 401(k) plan vary based on a business’ needs and solutions. While they tout a highly customizable plan that encourages more employees to participate, they don’t provide easy-to-find costs of the administration of their plans.

Employer and employee customer service

The Index Advantage plan, and Charles Schwab in general, provides great customer support and service for both employers and employees. First, all participants in the plan get access to the full suite of Schwab’s services, including access to their brokerage and banking services through Schwab Bank. In addition, because the plan is highly managed, small businesses that choose this 401(k) plan will always have help on their side if they ever need it.

What’s lacking

The main downfall of Charles Schwab’s Index Advantage plan is there is a lack of available information about the pricing. It’s hard for small business owners to tell whether this is an affordable option for their business. They have to hop on a phone call with someone from Charles Schwab to get that information. In addition, the Index Advantage plan does lack the availability of actively managed mutual funds, even if the reason for opting for index mutual funds is because it lowers the operating expenses. In addition, while the automatic opt-in feature might be good for getting more people to participate, some employees might not like the fact that they have to opt out instead of the other way around.

How to get started

To get started with Charles Schwab’s Index Advantage 401(k) plan, you have to call one of the company’s consultants at (877) 456-0777. There is a wealth of information about the Index Advantage plan and the benefits of all the features the plan offers on Schwab’s website.


  • Index Advantage is a great way for small businesses to take advantage of Charles Schwab’s wide offerings at a lower cost
  • Highly managed plan makes it easy for plan sponsors and participants
  • Automatic opt-ins help participants save more faster
  • Full suite of online services at your fingertips
  • Personalized service is given to each plan participant


  • Not a lot of available information on the costs and fees associated with the plan
  • Lacks the availability of actively managed mutual funds
  • Some participants may not like the automatic opt in feature
  • Have to call a consultant to get even an estimate on cost options
  • May have some higher fund fees than other similar products at other companies

Rating breakdown

  • Overall: 4.4
  • Investment Options: 4.4
  • Administrative Costs: 3.9
  • Ease of Set-Up: 4.1
  • Employer and Employee Customer Service: 4.8
  • Reputation: 4.9