Charles Schwab’s Schwab Intelligent Advisory may be the ultimate hybrid robo-advisor offering, combining features of the company’s existing robo-advisor, Schwab Intelligent Portfolios, with unlimited access to human advisors.
Schwab Intelligent Advisory directly competes with Vanguard Personal Advisor Services, Personal Capital and Betterment’s hybrid service, undercutting all three on both price and account minimum. The obvious appeal of Schwab Intelligent Advisory is that hybrid model of a low-cost automated service and hands-on guidance — but if access to a human advisor isn’t a priority, other robo-advisors may be a better (and more affordable) fit.
How Schwab Intelligent Advisory stacks up
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
|Account management fee||0.28%, with maximum of $900 per quarter|
|Investment expense ratios||Weighted-average ranges:
|Portfolio mix||Built from up to 53 ETFs covering as many as 20 asset classes; larger cash allocation than other services|
|Tax strategy||Tax-loss harvesting is free with $50,000 minimum balance|
|Human advisor option||Unlimited access to certified financial planners|
|Tools||High-quality tools for goal-setting, customization and stress testing financial plans|
|Customer support options (includes website transparency)||Clients 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.|
|Promotion ||None; only a referral bonus|
Where Schwab Intelligent Advisory shines
Management fee: Schwab Intelligent Advisory is a relative latecomer to the hybrid advice game, but it’s certainly had no trouble competing with peers. Schwab’s management fee is 0.28%, with a maximum of $900 charged per quarter, which just so happens to edge out its main competitors.
Intelligent Advisory is ever so slightly cheaper than the 0.30% charged by Vanguard Personal Advisor Services or the 0.40% fee for Betterment Premium, Betterment’s hybrid offering that also offers unlimited phone access to advisors. Schwab’s hybrid service is significantly less expensive than Personal Capital’s 0.89% offering.
Does two one-hundredths of a 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 0.06% to 0.20% 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 draws from up to 53 exchange-traded funds (ETFs) to create a diversified portfolio that can include up to 20 asset classes. Schwab favors its own funds, but third-party companies like Vanguard, BlackRock (iShares) and Invesco (PowerShares) also are in the mix. 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.
A lot of people will happily dole out financial advice, but quality matters — and a huge benefit with Intelligent Advisory is the on-call certified financial planners (these individuals have specialized training and must abide by a code of ethics). Schwab’s model for hybrid online advice 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 an 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.
Schwab’s hybrid model also goes beyond its standard robo offering to amp up the personalization factor. Services exclusive to Intelligent Advisory include the ability to customize multiple goals with different risk tolerance profiles and timelines; working with an advisor to create a personalized action plan and portfolio recommendations; and tools to stress test the probability of success of various financial plans.
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. Not only that, the annual percentage yield Schwab currently pays on cash allocations is much lower than you’d find at a bank or credit union.
Schwab finds this a non-issue — it outlines a compelling case for the merits of cash — but it’s something investors should be aware of, especially those who would prefer not to have uninvested cash in their portfolios.
High 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 — and customers must enroll in this feature.
Portfolio mix: Schwab draws upon an impressive number of ETFs, but that list won’t do much for investors with specific interests, such as socially responsible investing. Customers can swap out three ETFs for others from the list, but beyond that feature, the customization possibilities may feel lacking, especially for folks with a specific investing ethos. After all, some of the hands-off robo-advisors have niche offerings — and require a lower account minimum and charge lower management fees.
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 in this space, but Schwab’s offering 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.