Charles Schwab, the huge discount brokerage and money manager, today rolled out its own robo-advisor service, Schwab Intelligent Portfolios, to compete with the likes of industry leaders Wealthfront and Betterment. Schwab’s program offers a number of distinct features, including cash allocations and fundamental “smart beta” ETFs. It also appears to be free.
According to the press release, the Schwab Intelligent Portfolios unit uses algorithms that take into account clients’ goals, time horizons and risk tolerances in order to construct suitable portfolios from ETFs that rebalance automatically. The release also said there were no advisory fees, commissions or account service fees associated with the program.
Competitor Betterment charges up to 35 basis points, but can drop as low as 15 basis points for portfolios of $100,000 or more. Meanwhile, Wealthfront is free for portfolios under $10,000, but charges 25 basis points for portfolios above that amount.
The portfolios select their holdings from a menu of 54 ETFs that represent 27 asset classes in a quantitative process that looks at everything from bid/ask spreads to fees. Not only are Schwab funds included in the pool, but so are funds from Vanguard, iShares and PowerShares. Other robo advisors tend to use a more limited selection range, and to exclude nonmarket-cap weighted funds in favor or cheaper, plain-vanilla building blocks.
The selection range, however, is a concern for some. ETF.com’s Elisabeth Kashner blogged about the fact that the fundamentally weighted ETFs included in Schwab’s Intelligent Portfolio selection pool and the cash allocation have the potential to tilt the resulting portfolios toward small-caps. According to Schwab, the cash allocation is designed to help manage risk and volatility.
The minimum portfolio size is $5,000.
The Year In Launches
Things have been a bit slow on the ETF front lately, so we thought we'd take stock of launches so far this year.
As of last Friday, there were 40 launches so far this year. That’s a respectable number, for sure, but it’s still five fewer than the number of launches by the same date in 2014.
Does this mean there could be a drop-off in launches in 2015? There’s no way to tell until we get further into the year, but these early weeks certainly have had their share of notable launches and trends.
More than 15 of the ETFs launched so far this year qualify as smart-beta funds. That includes the launch of J.P. Morgan’s second ETF, the JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM), and the first four equity funds rolled out by ETF Securities in the U.S. ETF newcomer Lattice Strategies also rolled out three risk-focused funds covering the U.S., developed markets and emerging markets.
Income-focused ETFs were another prevalent theme, with the Master Income ETF (HIPS) kicking off the launches for the year on Jan. 7. It invests in high-income pass-through securities (thus its ticker). ProShares rolled out the ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL) and the ProShares Russell 2000 Dividend Growers ETF (SMDV)—two funds meant to have a long-term place in portfolios.
But perhaps the most anticipated launch of the year was the SPDR Double Line Total Return Tactical ETF (TOTL), which rolled out almost two weeks ago. Managed by DoubleLine founder, Jeffrey Gundlach, the active “go anywhere” fund already has more than $170 million in assets under management.
CN’s Name Changes
In other news, the name of the Deutsche X-trackers Harvest MSCI All China Equity ETF (CN | F-80) will change slightly to the Deutsche X-trackers MSCI All China Equity ETF, effective today.