Schwab's Robo-Advisor Goes Live

Schwab's Robo-Advisor Goes Live

The Apple Watch wasn’t the only new technology revealed on Monday. 

Charles Schwab officially launched its online, automated investment advisory service for retail investors, Schwab Intelligent Portfolios. The firm will launch a white-label version for RIAs in the second quarter, called Institutional Intelligent Portfolios.

While the field of so-called “robo-advisor” platforms is getting increasingly crowded, Intelligent Portfolios is the first in the mix to be offered with no commissions, advisory or account service fees.  

According to the firm, Intelligent Portfolios relies on algorithms to build, monitor and rebalance portfolios of low-cost ETFs with up to 20 asset classes and an FDIC-insured cash allocation. Portfolios will take into account each investor’s goals, time horizon and risk tolerance, similar to offerings from platforms like Wealthfront and Betterment, and automatically rebalance as markets change. Accounts are fully paperless, accessible from desktop computers and mobile devices, and can be funded through mobile check deposits. 

The service will draw from a total of 54 different ETFs from Schwab and third-party providers like Vanguard, iShares and PowerShares. 

“We know there are three controllable variables that have an impact on the long-term success of investors – being and staying invested; having access to quality investment advice and money management; and keeping costs low,” said Naureen Hassan, Schwab’s executive vice president in charge of the Intelligent Portfolios team. 

Unlike it’s competition, Schwab won’t charge fees or commissions. It does require a minimum investment of $5,000, which is the same as Wealthfront. Betterment does not have a minimum.

The only thing the consumer pays is the operating expense ratio of the ETFs. Schwab will make money from the difference between the interest rate it pays on cash allocations in Intelligent Portfolios accounts and the amount it earns from investments with that cash. It will also generate revenue from managing Schwab ETFs inside the portfolios and providing services to third party ETFs. 

Schwab is hoping Intelligent Portfolio’s cost and user experience will help more people start investing. Hassan noted a FINRA report that fewer than 30 percent of American consulted a financial professional in the past five years.

For clients investing at least $50,000, Intelligent Portfolios will also offer an automated tax-loss harvesting service. 

Schwab will launch a national advertising campaign to promote Intelligent Portfolios across online, television and print ads. 

TAGS: Technology
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