Long/short: Schwab apparently limiting adviser access
Echos of recent developments at Fidelity
Discounts for advisers, just reply to this email.
The preliminary agenda should be available on Friday.
Late yesterday, three advisers reached out with news about access to long/short strategies at Schwab.
Getting up to speed on tax-aware long/short? Start here.
Also developing…
The well-reported Avis short squeeze is apparently having an impact on tax-aware long/short investors, according to several sources with first and second-hand access to performance reports.
There’s only room in this post for one story, but the mechanics of that situation are interesting and will surely influence the risk management process at all managers going forward.
Many observers are drawing analogies to the VW 2008 short squeeze.
As a quick aside, the tax benefits in long/short strategies come from risk-taking (unlimited risk in the case of the shorts), which has practical implications some are painfully experiencing now, but also for economic substance analysis, which I'll hopefully explore soon.
Schwab adjusting access to long/short is interesting because I just wrote a little summary of Schwab CFO’s comments in the 1Q 2026 earnings call about how long/short is “not a balance sheet capital-intensive type of activity” and also, interestingly, a driver of margin growth (typically a good thing).
And before that, about how Schwab’s CEO appeared so accommodating to folks departing Fidelity, given Fidelity's new long/short account opening pause and subsequent targeted financing rate increase, saying “we’ve got a big balance sheet” at Future Proof Miami earlier this year.
He actually went quite a bit further, saying…
I think, you know, we benefit from the fact that we’ve got a big balance sheet.
We’re a public company. We can access markets. And so we can support the balance sheet growth that supports the leverage behind the strategy.
So we are supportive of it. And you can see why it makes a ton of sense and why I think it’s going to continue to grow.
We have, I’ll speak to our retail business for a moment. We have 70% of our retail clients that have a large concentrated position. And I’m sure a lot of your clients have benefited from single stocks that have gone well above where they expected. So they’re sitting on these enormous gains. This portfolio makes a ton of sense.
We’re going to support it. And I just want everyone in this audience to know that’s an RIA, bring your new assets to us. We’d love to support you.
However, based on adviser accounts shared with me yesterday, today Schwab will apparently announce the following changes:
