The Bottom Line: Schwab Intelligent Portfolios Premium is a good fit for investors who have large account balances and want online advice with access to a team of certified financial planners.
Schwab Intelligent Advisory
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Pros & Cons
Access to financial advisors.
Wide ETF selection.
$25,000 account minimum.
High cash allocation.
Tax-loss harvesting only available on $50,000 or more.
$300 planning fee.
Compare to Other Robo-Advisors
Schwab Intelligent Portfolios Premium is a hybrid robo-advisor, combining features of Charles Schwab's free online advisor, Schwab Intelligent Portfolios, with unlimited access to certified financial planners.
Previously called Schwab Intelligent Advisory, Intelligent Portfolios Premium was given a facelift in early 2019, with a new subscription-based fee structure alongside its new name. The service directly competes with Vanguard Personal Advisor Services, Personal Capital and Betterment Premium, but charges a flat rate of $30 a month instead of a percentage of assets under management.
That makes it difficult to for investors to compare costs, but here's the bottom line: If you're investing more than $120,000, Schwab Intelligent Portfolio Premium's flat management fee will beat the annual management fees of those three services.
One hitch: Schwab also charges a one-time planning fee of $300 when opening an account, which may rightly turn many new customers off.
Schwab Intelligent Portfolios Premium is best for:
Large account balances.
Comprehensive financial planning.
Unlimited access to financial advisors.
Where Schwab Intelligent Portfolios Premium shines
Management fee: As noted above, Schwab's new model takes a different approach to fees, charging a flat $30 per month (the fee is actually applied to accounts as $90 quarterly). Most robo-advisors — and human financial advisors — charge an annual fee calculated as a percentage of assets under management.
Like most flat fees, Schwab's pricing is ideal for high-balance investors, which seem to be the target of the service. To compare costs with other robo- and hybrid advisors, it's important to look at how much Schwab's flat fee costs as a percentage of your balance. Here's the percentage of assets under management you'll pay at sample portfolio balances:
$30/month as a percentage of assets per year
For context, compare these numbers to the 0.30% charged by Vanguard Personal Advisor Services, the 0.40% fee for Betterment Premium — Betterment's hybrid offering that also offers unlimited phone access to financial planners — and the 0.89% charged by Personal Capital.
As you can see, investors who deposit Schwab's minimum of $25,000 will get burned, while those who exceed $125,000 will enjoy very competitive costs when compared to other services. It gets almost unheard-of cheap as account balances climb into the high six figures.
To get the full picture, though, investors should look at the all-in cost of each advisor; 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.
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: Portfolios are still fully automated; they are built, managed and rebalanced by an algorithm. But Intelligent Portfolios Premium connects clients to a team of certified financial planners, who are available by appointment for phone and video chats.
A lot of people will happily dole out financial advice, but quality matters — and a huge benefit with Intelligent Portfolios Premium is the on-call certified financial planners. (These individuals have specialized training and must abide by a code of ethics). Clients also receive a written financial plan, and get access to interactive planning tools where they can update assumptions and change their plans.
That said, Schwab's model for hybrid online advice isn't entirely unique: Vanguard, Betterment and Personal Capital 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. Betterment offers access to financial planners, as well as planning packages that come with a one-time fee and are focused around life events.
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 Portfolios Premium 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 Portfolios Premium falls short
One-time planning fee: Schwab is the only online advisor we review that charges an upfront fee when opening account, which it calls a "one-time planning fee." It's a steep $300, and should be factored in when you compare the cost of services.
Revisiting the table above, that extra $300 nearly doubles the cost of Schwab's management for the first year:
$30/month + $300 as a percentage of assets in first year
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 Portfolios Premium right for you?
Intelligent Portfolios Premium may be a good fit for investors who want comprehensive planning assistance and low-cost, unlimited access to a team of financial advisors. It also has a lower minimum investment requirement than other hybrid offerings, at $25,000.
However, it doesn't even begin to compete on costs until investors have an account balance of $120,000 or more; at lower levels, it can be extremely expensive. That cost is exacerbated by the service's $300 one-time planning fee.
Bottomline: High-balance investors will get a lot of value out of Intelligent Portfolios Premium. Those with lower balances should consider the company's competitors. Another option? Opening an account at Schwab Intelligent Portfolios, then moving over to Intelligent Portfolios Premium when your balance grows.