Schwab Intelligent Advisory Review 2017

Advisors, Investing

Charles Schwab brought some heat to the online advisor battle with its Schwab Intelligent Advisory, a hybrid service designed to be a middle ground between the online broker’s financial consultants and its existing robo-advisor, Schwab Intelligent Portfolios.

The service directly competes with Vanguard Personal Advisor Services, Personal Capital and Betterment’s hybrid offering, undercutting the pricing of all three.


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Quick Facts

  • Management fee: 0.28%
  • Account minimum: $25,000

Comparable online financial advisors

"Betterment is the largest independent robo-advisor, offering strong retirement-planning tools."
Arielle O'Shea, NerdWallet Investing
Management Fee
0.25%
0.25%
Account Minimum
$0
$0
Promotion
Up to 1 year
Up to 1 year
of free management with a qualifying deposit
Management Fee
0.40%
0.40%
Account Minimum
$0
$0
Promotion
$50
$50
cash bonus with deposit of at least $1,000 in first 30 days
Management Fee
0.50%
0.50%
Account Minimum
$0
$0
Promotion
None
None
no promotion available at this time

Schwab Intelligent Advisory is best for:

  • Large account balances
  • Low-cost investment management
  • Comprehensive financial planning
  • Unlimited access to financial advisors

Schwab Intelligent Advisory at a glance

Overall

Account management fee0.28%; $900 quarterly cap
Investment expense ratiosWeighted-average ranges:
  • 0.07% for a conservative portfolio
  • 0.16% for a moderate portfolio
  • 0.21% for aggressive

PortfolioBuilt from up to 53 ETFs covering up to 20 asset classes, but larger cash allocation than other services
Account minimum$25,000
Account fees (annual, transfer, closing)None
Accounts supported
  • Non-retirement accounts
  • Roth, traditional and rollover IRAs
  • Trusts
Schwab’s advisors will also consider 401(k) and outside assets when offering guidance, but the service does not directly manage those assets.
Tax strategyFree with $50,000 balance minimum
Automatic rebalancingYes
Customer supportClients can schedule an unlimited number of appointments with certified financial planners, meeting via phone or video chat. Schwab also offers phone and live chat support 24/7.

Where Schwab Intelligent Advisory shines

Management fee: There’s a benefit to being a latecomer to the hybrid advice game; you can set your pricing just below the competition’s. Schwab Intelligent Advisory charges 0.28%, and fees are capped at $900 per quarter.

It’s certainly no coincidence that Schwab’s management fee ever so slightly edges out the 0.30% charged by Vanguard Personal Advisor Services. Intelligent Advisory is less expensive than Betterment Premium, the human-enabled online advice offering that Betterment launched this year, which charges 0.40% for unlimited phone access to advisors. It’s also significantly less expensive than Personal Capital’s 0.89% offering.

Does 0.02 percentage point really matter in the long run? Not that much — on $100,000 invested over 30 years, it’s the difference of a few thousand dollars — but differences greater than that certainly do.

To get the full picture, though, investors should look at the all-in cost; that is, the management fee plus investment expenses. The weighted-average cost of the portfolio, which most accurately reflects what investors are paying, ranges from 0.07% to 0.21% at Schwab, depending on allocation. That’s roughly in line with Vanguard and Betterment but may be notably higher than Personal Capital at some allocations — though not enough to make up for Personal Capital’s higher management fee.

Investments: The investments used here are the same that Schwab uses for Intelligent Portfolios: The service pulls from up to 53 exchange traded funds, covering up to 20 asset classes. Many are Schwab funds, but third-party companies like Vanguard, iShares and PowerShares make their way into the mix as well. That broad asset coverage is relatively unmatched among the competition, though Vanguard and Personal Capital both customize portfolios.

Unlimited access to certified financial planners: Intelligent Advisory connects clients to a team of certified financial planners, who are available by appointment for phone and video chats. An initial planning call is scheduled for an hour, and follow-up meetings generally last 30 minutes. The meetings can be scheduled in the service’s online scheduler.

The models used for hybrid online advice vary, but Schwab’s is fairly typical. Vanguard and Betterment also offer a team of planners. Vanguard includes a dedicated advisor for clients with balances that top $500,000. Personal Capital clients are always offered at least one dedicated advisor, which accounts — at least in part — for that service’s higher fee.

At Schwab, portfolios are still fully automated; they are built, managed and rebalanced by algorithm.

Comprehensive management: One perk of a service that offers human advice is flexibility, and Schwab delivers that. While the company’s list of supported accounts is similar to those of other online advisors, the financial planners will also consider outside accounts, factoring 401(k) plans and other assets into the planning process and goal projections.

Where Schwab Intelligent Advisory falls short

Large cash allocation: We’ve questioned this before, in our review of the Intelligent Portfolios service: Schwab’s investment philosophy includes a large cash allocation; even aggressive portfolios may hold 6% in cash. That brings up the concern of cash drag, when portfolios are “dragged down” by uninvested cash earning scant returns.

Schwab finds this a non-issue — it outlines why, and makes a compelling case, in this blog post — and independent after-fee return comparisons have actually put Schwab Intelligent Portfolios on top in 2016. But it’s something investors should be aware of, especially those who would prefer not to have uninvested cash in their portfolio.

Increased tax-loss harvesting minimum: Schwab’s minimum investment requirement is in line with or lower than that of other hybrid online advice services, but that minimum increases for clients who want access to tax-loss harvesting in their taxable accounts. Though free, that service requires a minimum of $50,000.

Is Schwab Intelligent Advisory right for you?

Intelligent Advisory is certainly enough to make the other players in this space nervous. It’s likely a good fit for investors who want comprehensive planning assistance and low-cost, unlimited access to a team of financial advisors.

Vanguard has a stronghold — and a head start — in this space, but the entry by Charles Schwab is good news for investors who can’t meet Vanguard’s $50,000 account minimum, and Schwab pretty handily beats Betterment Premium and Personal Capital in terms of management fees.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.