Robo Advisor Reviews

Schwab Intelligent Portfolios Review 2019 – Robo-Advisor With or Without Human Guidance

Schwab Robo-Advisor Review – Everything You Need to Know

Digital robo-advisors are popping up everywhere, from independent shops such as Wealthfront, Betterment, Personal Capital and WiseBanyan to those wedded to an existing firm such as Vanguard and Fidelity. The original robo-advisor originated as a low-fee, professionally managed investment portfolio made up of exchange-traded funds (ETFs) and is morphing into a hybrid, robo – human advisor model. Many solely automated investment portfolios are adding access to human advisors and Schwab’s Intelligent Advisory joins Betterment as the newest to jump on that trend.

Here’s the latest about the legacy Schwab Intelligent Portfolios and the new CFP® assisted Advisory service, Schwab Intelligent Portfolios Premium. Uncover the details, advantages and disadvantages.

Schwab Intelligent Portfolios and Schwab Intelligent Advisory Reviews-Pros & Cons

Schwab Intelligent Portfolios – The Original Robo-Advisor

Schwab rocked the robo-advisory industry with two differentiating features; zero management fees and a cash asset allocation category. Since that time, Schwab’s robo-advisor amassed $37 billion in assets under management (AUM) as of December 31, 2018 and earned a second place to Vanguard’s $115 billion AUM, in the competitive robo-advisor field.

The Schwab Intelligent Portfolios, basic service has a lot going for it. In a nutshell, the free automated investment service begins with a few initial questions, to determine your risk tolerance levels. Schwab drives its portfolio make up by your goals and risk comfort. Using your responses to the questionnaires, the platform recommends a diversified investment portfolio, in accord with your preferred risk level.

Bonus; 5 Lowest Fee Robo-Advisors >>>

Conservative investors portfolios hold more cash and bond ETFs while those younger and more comfortable with risk will hold a greater percent of stock funds in their account.

The Schwab Intelligent Portfolio requires a $5,000 account minimum. If the entrance minimum is too steep for you, consider M1 Finance’s $100 minimum, also with zero management fees.

As is customary, the portfolio regularly rebalances the funds back to your original asset allocation. Additionally, Schwab professionally monitors the asset allocation to make certain that it is both in line with your investor profile and that the funds remain in accord with the stringent Schwab screening process.

Taxable accounts valued at more than $50,000 are eligible for the tax-loss harvesting service. This means, “If a taxable security has lost value since you purchased it, you can sell it at a loss, and use the loss to offset your capital gains, and up to $3,000 of ordinary income a year, for federal income tax purposes”, according to Schwab’s FAQ.

Schwab Intelligent Portfolios Premium – The Robo-Advisor + Human CFP®

Similar to Betterment and Personal Capital, Schwab recently added the new human advisor-assisted version of their robo-advisor; Schwab Intelligent Portfolios Premium.

And here’s where Schwab is disrupting the fee model for financial advice.

Schwab intelligent Portfolios Premium fee is based on a subscription model. After a $300 set up fee, the cost is $30 per month, regardless of the size of your portfolio.

The minimum investment amount is $25,000.

Here’s what you get for the Schwab robo-advisor premium subscription:

  • Diversified portfolio of low cost investments, apportioned to account for your age, goals and risk tolerance.
  • Daily portfolio monitoring and automatic rebalancing when needed.
  • Tax-loss harvesting
  • 24/7 support from professionals
  • Unlimited individual guidance from a Certified Financial Planner professional
  • A complete financial plan
  • Interactive online planning tools

The Schwab Intelligent Portfolios Premium has 30 dedicated certified financial planners (CFP®) across the country who counsel clients by phone or video chat. Each salaried employee claims an average of 10 years of experience and uses the same planning software. This creates consistency across the platform.

The Schwab Intelligent Portfolios Premium client receives financial planning including a comprehensive financial plan.

“A comprehensive financial plan is like having a roadmap to help with your financial goals. It takes into account all aspects of your financial life—income, expenses, investments, college savings, retirement planning, and more.” ~Schwab website

The Schwab Intelligent Portfolios Premium clients can talk to an advisor whenever questions arise.

The on-boarding process for the Schwab Intelligent Portfolios Premium is more complex than for the Schwab Intelligent Portfolios. You complete a detailed online questionnaire that includes information on your current assets and financial goals. The document queries future plans such as retirement college funding and major purchases.

From the questionnaire responses, you get a detailed digital plan and portfolio that can be discussed with the financial advisor. You can view your plan to uncover your progress and amend it online at will.

You can discuss your goals and questions with the advisor, including when to take Social Security, whether to rent or buy a home and more. Further, you can add assets to your digital dashboard that are not under Schwab management, for a more holistic view of your financial picture.

How Do the Schwab Intelligent Advisory CFPs® Differ From the Branch-Based Financial Consultants?

All 30 Planning Consultants in The Schwab Intelligent Portfolios Premium are CFPs®.

Schwab has 325 or more branches across the country with 1,100 financial consultants. Of the branch based advisors, 800 are CFPs®.

Although branch-based Schwab financial consultants can answer basic questions about Intelligent Portfolios, such as how it works, the questionnaire etc. they don’t “advise” on the portfolios because the Intelligent Portfolios are centrally managed by a distinct team.

So, don’t drive over to a branch and expect to get full on financial planning from a financial representative.

Available Accounts for Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium

The account types for both Schwab Intelligent Portfolios and Schwab Intelligent Portfolio Premium include:

  • Brokerage: Individual, Joint Tenant with Rights of Survivorship, Tenants in Common, Community Property, Custodial
  • Revocable Living Trust: Single Trustee, Two Trustees
  • Retirement: Roth IRA, Traditional IRA, Rollover IRA

Investment Funds for Both the Schwab Intelligent Portfolios

Both Schwab robo-advisor platforms invest your money in exchange-traded funds from a pool of 53 choices, representing 20 asset classes. Of that group, approximately 60% of the ETFs are Schwab’s while other funds are managed by Vanguard, iShares and PowerShares, according to a recent press release. The funds represent a wide range of asset classes including real estate and precious metals in addition to the various stock and bond funds.

CategoryPrimary ETFSecondary ETF
STOCKS
US Large CompanySCHX–Schwab U.S. Large-CapVOO–Vanguard S&P 500
US Large Company–FundamentalFNDX–Schwab Fundamental U.S. Large CompanyPRF–PowerShares FTSE RAFI US 1000
US Small CompanySCHA–Schwab U.S. Small-CapVB–Vanguard Small-Cap
US Small Company–FundamentalFNDA–Schwab Fundamental U.S. Small CompanyPRFZ–PowerShares FTSE RAFI US 1500 Small-Mid
International Developed Large CompanySCHF–Schwab International EquityVEA–Vanguard FTSE Developed Markets
International Developed Large Company -FundamentalFNDF–Schwab Fundamental International Large CompanyPXF–PowerShares FTSE RAFI Developed Markets ex-U.S
International Developed–Small CompanySCHC–Schwab International Small-Cap EquityVSS–Vanguard FTSE All-World ex-US Small Cap
International Developed Small Company–FundamentalFNDC–Schwab Fundamental International Small CompanyPXF–PowerShares FTSE RAFI Developed Markets ex-U.S
International Emerging MarketsSCHE–Schwab Emerging Markets EquityIEMG–iShares Core MSCI Emerging Markets
International Emerging Markets–FundamentalFNDE–Schwab Fundamental Emerging Markets Large CompanyPXH–PowerShares FTSE RAFI Emerging Markets
US Exchange-Traded REITSSCHH–Schwab U. S. REITVNQ–Vanguard REIT
International Exchange-Traded REITSVNQI–Vanguard Global ex-U.S. Real EstateIFGL–iShares International Developed Real Estate
US High DividendSCHD–Schwab US Dividend EquityVYM–Vanguard High Dividend Yield
International High DividendHDEF-xTrackersMSCI EAFE High Dividend Yield Equity ETFVYMI-Vanguard International High Dividend Yield
Master Limited PartnershipsMLPA–Global X MLPZMLP–Direxion Zacks MLP High Income
FIXED INCOME
US TreasuriesSCHR–Schwab Intermediate-Term U.S. TreasuryIEI-iShares 3-7 Year Treasury Bond
US Investment Grade Corporate BondsSPIB-SPDR Portfolio Intermediate Term Corporate BondVCIT–Vanguard Intermediate-Term Corporate Bond
US Securitized BondsVMBS–Vanguard Mortgage-Backed Securities MBB-iShares MBS
US Inflation Protected BondsSCHP–Schwab U.S. TIPSIPE-SPDR Bloomberg Barclays TIPS
US Corporate High Yield BondsHYLB-X trackers USD High Yield Corporate BondUSHY-iShares Broad USD High Yield Corp Bond
International Developed Country BondsIAGG-iShares Core International Aggregate BondBNDX-Vanguard Total International Bond
International Emerging Markets BondsEBND-SPDR Bloomberg Barclays Emerging Markets Local BondEMLC-VanEck Vectors JP Morgan EM Local Currency Bond
Preferred SecuritiesPFFD-Global X US PreferredPSK-SPDR Wells Fargo Preferred Stock
Bank LoansBKLN–PowerShares Senior LoanN/A
Investment Grade Municipal BondsVTEB–Vanguard Tax-Exempt BondTFI–SPDR Nuveen Barclays Municipal Bond
Investment Grade California Municipal BondsVTEB-Vanguard Tax-Exempt BondTFI-SPDR Nuveen Bloomberg Barclays Muni Bond
COMMODITIES
Gold and Other Precious MetalsIAU–iShares Gold TrustGLTR–ETFS Physical Precious Metal Basket Shares

Each individual investor’s portfolio might contain up to 20 asset classes, as represented by an individual ETF.

When investing in any mutual or exchange-traded fund, you pay a fund management fee. This is apart from the percent that you pay to the Advisory robo for your overall portfolio management. The 53 individual fund fee’s range from 0.03% to 0.65% of assets. Schwab explains that the weighted average that customers pay is 0.07% for conservative holdings, moderate and aggressive portfolios are 0.16% and 0.21% respectively.

Tax loss harvesting for Intelligent Advisory portfolios requires a minimum $50,000 account balance.

The Cash Asset Class

Every investment portfolio has from 6% to 29% in the cash asset class, depending upon your asset allocation. More conservative investors would hold greater amounts of cash than more aggressive portfolios. Michael Cianfrocca of Schwab explained that very few clients will hold the maximum amount of cash.

Schwab explains three benefits of the cash position:

  • Provides stability
  • Offers downside protection and cushions negative returns when stock and bond funds go south
  • Adds additional diversification

Additionally, the cash will earn interest at a rate in line with the national average money market interest rate.

How Do Schwab’s Robo-Advisors Make Money?

Schwab’s Intelligent Portfolio Premium subscription fee predominantly goes to fund their cadre of salaried Certified Financial Planners®.

Both robo-advisors also make money from two additional sources:

  1. Schwab earns revenue from a small management fee for the Schwab ETFs and revenue on some 3rd party ETFs.
  2. The cash portion of your account is held in the Schwab bank, thus they profit from the access to your money, such as for lending and more.

Visit the Robo-Advisor Selection Wizard, take a quick quiz, and find out which robo-advisor is the right one for you.

Pros and Cons of the Schwab Robo-Advisors

Pros

You can’t beat the fees. Zero management fees for the Intelligent Portfolios is tough to beat, despite a small cash allocation. The monthly subscription management expense ratio fee for the human-assisted Intelligent Portfolios Premium is reasonable for larger portfolios, greater than $100,000.

The investment minimums are affordable for many investors, with $5,000 for the Intelligent and $25,000 for the Advisory.

Diversification options are great with a selection of 53 funds across a wide range of asset classes.

Schwab judiciously selects ETFs with low average fund management fees. Schwab’s white paper explains how the funds are chosen.

The Schwab brand ensures that the firm will be in business for the long term.

Cons

Some investors consider the cash allocation a negative, especially in the current low-interest rate environment as that money is not earning you much of a return. Many robo-advisors lack a cash allocation. Personally, I like a cash allocation for the reasons that Schwab describes and don’t find it bothersome that they’ll garner a small benefit from holding the money in their bank.

With branches scattered across the country, it’s unusual that most Intelligent Advisory clients will need to talk via phone or video chat with their advisor and don’t have an in-person option.

If your Schwab Intelligent Portfolios Premium account is smaller, the $30 per month subscription fee equates to a higher percentage of assets under management. For instance, with an account of $25,000, the $30 per month is equivalent to a hefty 1.44% AUM fee.

Schwab Intelligent Portfolios Review Takeaway

Personally, I would consider investing in either platform. Schwab rightly holds a solid place in the low fee, high-quality investment arena. I like the diversity of funds and asset classes. If you don’t need to speak with an advisor, then it’s tough to beat the zero management fee for Schwab Intelligent Portfolios. For all access financial advisors, the Intelligent Portfolios Premium is a low-fee alternative to a typical financial advisor.

Updated; April 10, 2019

 

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Barbara A. Friedberg, MBA, MS

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8 Comments

  1. D bankston
    July 16, 2018 at 3:33 pm — Reply

    Are automated robo-advisors regulated by the SEC or other govt agencies?

  2. July 21, 2018 at 4:58 pm — Reply

    Robo-advisers are subject to the same regulatory framework as traditional financial advisors.
    Finra.com explains the financial advisory regulations.
    “The SEC regulates investment advisers who manage $110 million or more in client assets, while state securities regulators have jurisdiction over advisers who manage up to $100 million. Advisers with less than $100 million in assets under management (AUM) must register with the state regulator for the state where the adviser has its principal place of business. When a state-registered adviser’s AUM reach the $100 million threshold, the adviser may elect to register with the SEC—but when the adviser’s AUM exceeds $110 million, it generally must register with the SEC. It is important to find out exactly which services a professional who wears multiple hats will provide for you and what they will charge for their services. You can get background information on both SEC- and state-registered investment advisers by using FINRA BrokerCheck.”

  3. Mark
    March 29, 2019 at 4:40 pm — Reply

    Would be great if someone can compare Avergae Rate of Return across the various Robo advisors. My SIA portfolio is aggressive but it’s getting ROR about 20% Lower than SP500.. They are saying it’s diversified and has lower beta than SP500 but I still doubt it could be lower by that much ..

    • March 31, 2019 at 3:19 pm — Reply

      Hi Mark,

      I am opening accounts at multiple robo-advisors and gathering just that information for my readers.

      In the meantime, here’s an article you might appreciate:

      https://www.roboadvisorpros.com/best-robo-advisor-performance/

      Also, be aware that your returns will reflect your underlying asset allocation, or percent of your assets invested in various types of funds.

      Finally, lower fees correlate with higher returns. Check out the fees that you’re currently paying on your investments now, both to an advisor and on the funds themselves.

      Here’s another article you might appreciate:

      https://www.roboadvisorpros.com/6-robo-advisors-lowest-fees-info-need-to-know/
      Good luck and keep us posted.

    • April 8, 2019 at 11:52 am — Reply

      The best way to compare returns is to look at the funds within your account. Then compare their returns with their respective benchmarks. In fact, the fund reports typically list that information. (I know it’s rather boring to read through, but well worth the time!) If you have an SIA portfolio with bonds, cash and stocks, it’s not appropriate to compare the returns with the all stock S&P 500. Also, it’s very important to consider the fees that you’re paying. In general, robo-advisors charge lower fees than many managed portfolios.

      You might consider putting your portfolio through the Personal Capital free dashboard and checking out the “fee analysis”. Here’s our affiliate link for access https://www.roboadvisorpros.com/go/personal-capital/.

  4. Curtis Hass
    May 30, 2019 at 3:58 pm — Reply

    Where does Zacks Advantage robo fit into your system?

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