IMPACT Conference
Schwab: Don’t Be Afraid of Our Robo Offering

Schwab: Don’t Be Afraid of Our Robo Offering

On the heels of Charles Schwab’s recent announcement that it would come out with an online advice platform, CEO and President Walt Bettinger assuaged advisors’ concerns at the firm’s annual IMPACT conference this morning. Advisors don’t need to be afraid of Schwab’s offering, as advisors themselves will be able to white label the technology for use with their clients.

“With online advice, it’s the top of the first inning, and there’s one out,” Bettinger said, during the kickoff session of IMPACT in Denver.

Robo advisors have taken the easiest things an advisor can do, but they can’t act as a psychologist to investors. That is the biggest value proposition of an advisor, and the top reason online advice won’t replace the flesh-and-blood advisor, he added.

Bettinger also pointed to the statistics to calm advisor fears: The online advice business has $5 billion in assets, compared to $4 trillion in the financial advisory space. Robo advisors are not even out of the bullpen yet, he says.

In addition, the growth in the online advice world has occurred under the umbrella of a huge bull market; we don’t yet know how these platforms would hold up in a bear market.

That said, half of advisors surveyed by Schwab say they are interested in having an online advice offering. That’s why Schwab is making the technology available for white label by advisors via the web and mobile devices. Advisors can customize the selection of ETFs as well as asset allocation pies among 25 different asset classes in the offering. The assets in the offering will also be custodied at Schwab, so it will be integrated with RIAs’ reporting.

The robo advisor platform will feature institutional-quality asset allocation via ETFs, Bettinger said. It will be a fiduciary offering—under the clients’ best interest standard—not a brokerage offering. Other features include automatic rebalancing if there’s performance drift and tax loss harvesting. It will also be paperless, and adopted for mobile.

Schwab’s offering is not free; the company will make its revenue if ETFs go through the screener and on the cash portion of investors’ portfolios. But there will be no portfolio advisory fees, management fees or commissions. Bettinger is surprised, however, at how other online platforms are marketed to advisors. “They’re charging basis points for technology,” he said. Under Schwab’s platform, there will be a no-basis points option.  

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