Schwab To Launch Its Own Robo Advisor

October 27, 2014

Wealthfront look out: Low-cost Schwab wants a piece of the automated advisory market. 

Charles Schwab is entering the world of so-called robo advisors with the planned launch of an automated portfolio management service that will compete with the likes of Wealthfront and Betterment. But it is free of charge, which sets it apart from most existing robo advisors.

The “Schwab Intelligent Portfolios,” as the service is called, isn’t expected to launch until sometime in the first quarter of 2015, but Schwab is already busy spreading the word about what it is that makes its advisory different from its peers. Among the details it teased out in a press release today are:

  1. The service will charge no advisory, account services or commission fees to retail investors. It will be completely free beyond the expense ratios of the ETFs comprising the portfolios. By comparison, some of the largest competitors in this space charge anywhere from 0.15 to 0.35 percent a year, or $15-35 for each $10,000 invested.
  2. The platform will benefit from the backing of the Schwab brand name, and that’s no small advantage. The firm has a long history and an extensive track record managing $2.3 trillion in assets. Schwab’s team will also be available to offer expertise and the occasional needed human touch—if investors need it—to the otherwise-completely automated platform.
  3. The all-ETF portfolios will tap into some 20 global asset classes through a variety of ETFs. That’s one of the broadest scopes in the automated advisory business, Naureen Hassan, vice president of the Intelligent Portfolios, tells

      In a broader sense, the decision to move into the so-called robo-advisory space seems shrewd for the brokerage and asset management firm, if you consider that firms like Wealthfront and Betterment are seeing assets grow rapidly in a short time.

      Broad Appeal

      Behind the booming trend of robo advisories is very real demand from younger generations of investors for easy-to-use, automated and affordable portfolio solutions. Schwab is hoping that its broad reach will allow it to expand its automated service beyond the millennials, and ultimately appeal to a much broader range of investors, Hassan says.

      At the heart of these automated portfolios are ETFs—vehicles that afford low-cost access to just about every asset class today in an easy-to-trade, transparent way. Schwab’s service will include a wide variety of ETFs that offer “great value for clients,” Hassan notes.

      Among the criteria for ETF selection, the platform will look for low expense ratios, as well as factors such as size and liquidity, bid/ask spreads and tracking differences, she says. ETFs included in the automated portfolio do not need to be part of Schwab’s OneSource platform.

      Retail investors need $5,000 minimum to get started, and a $50,000 balance minimum to benefit from services such as tax-loss harvesting.

      Schwab is also planning to launch a registered investment advisor version of the service, wherein advisors can customize their portfolios, and while that platform will have “multiple pricing models,” no advisory fees will be charged, Hassan says.



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