Schwab Intelligent Portfolios at a glance
Pros: Where Schwab Intelligent Portfolios stands out
Schwab Intelligent Portfolios has two service tiers – basic and premium. They both offer good value, although at different price points and they target audiences having varying needs.
The base-level service offers key features of a robo-advisor at no fee: portfolio management, auto rebalancing and tax-loss harvesting. That fee is lower than what you’ll find across the industry, where the standard is about 0.25 percent. To put that in perspective, you’re NOT paying about $25 annually for every $10,000 you have invested.
The premium-level service ups the game in one key way – unlimited access to advisors with a certified financial planner (CFP) designation – and it could be a game-changer for many clients. These advisors must operate by a fiduciary standard, that is, in your best interests.
The cost: $30 a month plus a one-time $300 set-up fee. It’s an attractive price, especially if you’re more flush with cash, because you’ll pay one flat monthly price regardless of how much money you bring to the table. In contrast, most robo-advisors charge a percentage of your assets.
So Schwab is trying to attract two groups with its robo-advisor: entry-level investors with some but not a lot of money and those with a bit more who can see the value in its premium tier.
Of course, investors will also have to pay for the ETFs they’re invested in, as they would at any robo-advisor or if they invested on their own. Schwab says that a typical portfolio would have an expense ratio of between 0.05 and 0.18 percent, with more conservative portfolios being on the lower end and more aggressive ones toward the higher end. In terms of money, that would be a cost of $5 to $18 annually for every $10,000 you have invested there.
Premium-tier human advising
Just a few more words on Schwab’s premium tier, because it tries to solve a problem that many investors have with traditional robo-advisors: the lack of a human advisor for less routine questions and more specialized expert support. So by adding a human advisor into its offering, Schwab is trying to bridge a gap in what a typical robo-advisor provides. That’s the big added feature of the premium tier and likely the most compelling reason for you to upgrade to it.
But you’ll have to bring at least $25,000 to take advantage. For that reason the premium tier is not likely to make sense for many investors. And depending on your needs, it may not even make sense at this minimum. At the minimum threshold, you’ll pay an effective fee of 0.7 percent (still well below a typical human advisor’s 1 percent fee), though that rate falls quickly as you grow your assets. Sitting on a million bucks? You’re still paying only that $360 fee, an effective rate of below 0.04 percent. So it can be highly beneficial for the mass affluent.
The premium tier provides serious value for those who can bring money to the relationship.
One of Schwab’s strengths as a broker is its customer support, whether that’s via phone, chat or physical branches. So it’s good to see that robo-advisor customers have access to the company with the same high level of service as its brokerage customers. That includes 24/7 access to U.S.-based customer support via phone or chat.
You’ll also be able to go into a Schwab branch, at more than 300 locations, for further help. For some clients this physical presence may be an advantage over online-only rivals.
The onboarding process is as smooth and as seamless as these things go. It’s particularly easy if you’re already a Schwab client, because much of your personal information is already loaded into the account, and all you need to do is verify that it’s correct and agree to some legalese.
From there you’ll answer a dozen questions about your goals, risk tolerance and return expectations. Are you saving for a specific goal, such as college, a house or retirement? The robo-advisor takes those specific needs into account as it creates your portfolio.
As you go through the questions, you can see your portfolio allocations take shape in a pie chart to the left. You’re comfortable with risk and want to buy more stock when the market is down? Watch your allocation to stocks climb! If you decide later that you don’t like your portfolio allocation, you can redefine your profile and receive different allocations.
You can be up and running in 10 minutes easily, and then you’ll just need to fund the account. If you already have assets at Schwab, you can quickly transfer them over and be on your way.
Broad range of investment options
In total, Schwab Intelligent Portfolios uses 51 different ETFs across 26 different asset classes, and these form the building blocks of all potential portfolios. A larger range of investment choices may allow the robo-advisor to tailor the portfolio better to achieve desired outcomes.
Schwab offers three broad portfolio strategies from which it can customize your individual portfolio:
- A global strategy, which includes U.S. and international stocks, fixed income and cash
- A U.S.-based strategy, which includes U.S. stocks, fixed income and cash
- An income-focused strategy, which offers more exposure to "blue-chip" companies, higher-yielding assets such as preferred stocks and other short-term floating-rate notes
The robo-advisor can also substitute tax-free municipal bonds in place of fixed income securities, where it may make sense for taxable accounts and higher-income individuals.
Schwab Intelligent Portfolios offers a robo-advisor that is likely to work well for many investors, and it could be a natural add-on for those who already have an account with the broker. The no-fee structure is a great enticement, of course, but those who can use the premium service tier (when it makes financial sense) will derive a lot of value from real fiduciary advisors, especially as their assets climb but their fees don’t. And Schwab competes favorably by bringing its solid reputation for customer support into the mix, too.
If you’re looking to get a robo-advisor at a low cost, you could also look at SoFi Automated Investing or even Ellevest, which offers an investing plan at just $1 a month. Or if you need unlimited access to financial advisors you could turn to Betterment’s Premium plan.
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