With over $43 billion in assets under management, Schwab Intelligent Portfolios is the second-largest direct-to-consumer robo advisor. It offers two service tiers: the first is digital-only and has no management fee, and the second (Schwab Intelligent Portfolios Premium) has a higher minimum and charges a monthly fee for access to live advisors. Through Intelligent Portfolios Premium, a client can work with an advisor to create custom financial plans for complex financial situations.
- Strong digital financial planning tools
- Low management fees at high levels of assets
- High management fees at low-to-mid asset levels at the premium service level
- A high percentage of the portfolio is left in cash, which has hurt performance
|Account Minimum||Intelligent Portfolios: $5,000|
Intelligent Portfolios Premium: $25,000
|Advisory Fee||Intelligent Portfolios: no fee|
Intelligent Portfolios Premium: $300 initial planning fee, $30/month subscription
|Average Weighted Expense Ratio||0.21%|
|Accounts Supported||Taxable, IRA, Roth IRA, SEP IRA, Trusts, Joint, Custodial|
Performance Figures (as of 3/30/2020):
|1-YR Trailing||1-YR Sharpe Ratio||2-YR Trailing (annualized)||2-YR Sharpe Ratio|
|Intelligent Portfolios Taxable||-10.19%||-0.52||-4.82%||-0.37|
|Intelligent Portfolios IRA||-18.14%||-0.68||-9.40%||-0.47|
Digital Advice Ratings
Access to Advisors ⭐⭐⭐(2.5/5)
Schwab does not offer live advisors in its base offering, but users can upgrade to Intelligent Portfolios Premium for access. All advisors are CFPs who can work closely with clients. In fact, Schwab’s premium tier charges a $300 one time fee at the onset for a financial consultation in which a planner can view an investor’s holistic financial picture and craft a specific plan. However, users do not have dedicated advisors. They can request to consult with the same advisor each time but there is no guarantee they will be able to do so.
Financial Planning ⭐⭐⭐⭐⭐(4.5/5)
Working with an advisor, users can plan for multiple long-term investment goals and receive a complete illustration of their financial lives. Additionally, Intelligent Portfolios Premium offers strong digital planning tools that allow users to build multi-goal financial plans that prioritize certain goals. Additionally, Schwab announced a retirement income planning tool called Schwab Intelligent Income that provides retirees with a hassle-free “paycheck” from their brokerage account. Schwab beats out other incumbent financial institutions in terms of its digital financial planning tools and is on par with the tech offered by startup firms.
Transparency and Conflicts ⭐⭐⭐(3/5)
Schwab scored in the middle of the pack in terms of transparency. While Schwab does allow investors to see the holdings of a portfolio before it is opened, it does not make the historical performance of its models public. Lastly, Schwab uses almost entirely proprietary funds in its portfolios. Its proprietary funds are more expensive than comparable funds provided by competitors.
Features and Customer Experience ⭐⭐⭐ (3/5)
Schwab lags behind some competitors in regards to the various features and technologies available on its platform. As a large institution, it is able to offer customers many other services, including traditional banking and savings offerings. Intelligent Portfolios offers tax-loss harvesting but does not offer fractional shares. One major shortcoming of Schwab’s robo offering is that it keeps a large percentage of a customer’s portfolio in cash—over 10% in Backend Benchmarking’s various portfolios at Schwab. Over the past three years, both bond and equity markets have posted strong returns. During these periods of strong market growth Schwab’s cash holdings have been a drag on their performance.
Costs (annually) ⭐⭐⭐⭐ (3.5/5)
Intelligent Portfolios does not charge a management fee, placing it among the least costly robo advisors. For its Intelligent Portfolios Premium, Schwab is one of only a few robo advisors that uses a subscription pricing model. Users pay a flat $300 fee upon signing up and then a $30 monthly fee going forward. This model can either be very pricey or affordable depending on an investor’s assets levels. As an investor’s assets go up, the subscription model becomes more attractive since the fixed cost is spread out over more assets and the investor is paying less as a percentage of assets. Although it is difficult to quantify the cost, the large cash allocation in the portfolios help’s Intelligent Portfolios not charge a management fee.
|Management Fee||Fund Expenses||Total Cost|
|Intelligent Portfolios Premium*||$360||$21||$381|
*Per $10,000. Schwab Intelligent Portfolios Premium charges a flat monthly fee on $30. Thus, the management fee on any level of assets would be $360/year. There is also a one time $300 financial planning fee.