Schwab Portfolio Rebalancer Enhancements

Schwab Institutional recently announced updates to its online Portfolio Rebalancer utility.  In response to feedback from advisers, Schwab added several new features to the rebalancing tool.

Holding Information View

The first feature added is the ability to view holding information for a client either by account or in aggregate from the primary step.  This option saves a few clicks so the user can quickly identify the relevant holdings for any given client.

Cash Positions

Second, Portfolio Rebalancer is a bit smarter when it comes to dealing with cash positions.  Users may now specify “cash buffers” in one account or in all accounts.  In addition, cash-only rebalance activity is now supported, so users can utilize the Rebalancer to automatically generate a list of trades to invest cash across selected holdings in an account to bring it back into balance.  The same is true for cash withdrawals: cash can be generated pro-rata across the account’s allocation.

Security Locks and Allocation Bands

Lastly, security lock and allocation band features have been added.  The security lock allows users to identify securities that should not be used in the rebalance calculations, effectively “locking” the securities from the rebalance.  The allocation band, otherwise known as a tolerance setting for rebalancing, allows users to specify upper and lower percentage tolerance bands for specific securities within a model portfolio.  It is a way model designers can specify that when a security’s allocation is outside the allocation band, a.k.a. tolerance, it should be rebalanced.

I spent some time using the allocation band feature and am generally impressed with its functionality.  The first thing I tried was to specify fractional percentages for the bands which posed no problem for the tool.  However, determining how the bands affected trades was a bit more convoluted.

Bands are optional when creating a model allocation, but one is not able to see how the bands affect trades until the final screen in the rebalancer.  Essentially, securities with allocations outside of the bands show up with trades, while all the rest simply don’t show up.  One has to jump back and forth between screens to see which securities are over/under weight to verify that the proper number of trades anticipated appear in the final screen.

Clearly Identify Rebalancing Trades

I’d like to see additional improvement on the final proposal screen used to display required rebalancing trades.   The screen should summarize all securities shown with respective dollar amounts, % of portfolio weight, followed by the lower and upper tolerance bands.  Securities with allocations outside the bands could be highlighted with a color; THEN when I go to the next screen, only those securities outside the bands will show up with trades. 

Nevertheless, it’s good to see these enhancements to the Portfolio Rebalancer utility.  Although not as robust as dedicated rebalancers in the market (e.g. iRebal), Schwab’s tool simplifies the potentially laborious process of bringing accounts into balance with specified models.