Schwab Intelligent Portfolio Review

Charles Schwab’s Intelligent Portfolios offering was made available to the public in 2015. It immediately grabbed attention because of its zero-fee advisory service with a minimum investment of $5,000. Later on, the company also launched a premium service that allowed its customers unlimited access to one-on-one guidance from certified financial planners. The financial planners can generate a personalized action plan for an initial fee of $300 with monthly charges of $30. To avail the premium service, investors must have at least $25,000 in their investment corpus. This review and our rating focus on the standard offering, but we will cover some of the attributes of the premium product as well.

Charles Schwab Intelligent Portfolio review:

Overall rating: 3.8/5

  • Minimum investment corpus in the account: $5000
  • Fees: $0, underlying ETFs average 0.08% to 0.15% management fees

Schwab’s service sets up a portfolio chosen from 53 exchange traded funds (ETFs) across 20 asset classes, including commodities. Some other prominent robo advisors in the market offer access to a commodity ETF. Part of your portfolio, usually 8% to 10%, remains in cash, which is one of the ways Schwab earns money while charging no management fee. The company’s other sources of revenue are management fees earned on the Schwab ETFs held in the portfolio and the market centers executing ETF trade orders.

The standard account gives you access to investing professionals, although not a dedicated planner. Your portfolio is monitored and rebalanced daily if required. Let’s look at the pros and cons of Charles Schwab Intelligent Portfolios. 

Pros:

  • No management fees
  • The platform includes a very easy-to-use website and app
  • A standard account holder can switch to the premium level once the account minimum has been attained
  • Schwab’s education offerings and library of resources are available to Intelligent Portfolio clients

Cons:

  • The portfolio is not revealed until the account is funded, and it is not customizable
  • The platform requires higher-than-average cash balances
  • Portfolio contents focus on Schwab-managed ETFs, which do generate fees for Schwab
  • Little goal-planning help available

Individual Ratings

Account setup – 2.5/5

Opening an account takes you initially to a text-heavy page that contains tons of disclaimers. Most other advisory services save the fine print until you’re further into the method and a touch more committed. You’re taken through a brief questionnaire that asks about what proportion you’d wish to deposit initially and your attitude toward risk. If you’re already a Schwab customer, you’ll easily move cash from your existing accounts into the new service. 

You can open standard taxable accounts as individual retirement accounts (IRAs). You’ll also be able to open trust accounts and accounts for minors. Few of the robo-advisors allow clients to open a consistent gift to minors accounts (UGMA), so Schwab has a plus here for folks or guardians looking to form a financial gift to their children while also ensuring it’s prudently invested.

After you complete the questionnaire, you’re shown your potential asset allocation, but not the particular ETFs which will comprise your portfolio. Moreover, there are not any customization options beyond adjusting your risk measure. Schwab recommends retaking the questionnaire on an annual basis to make sure your portfolio matches your goals, risk tolerance, and investment time horizon.

Goal Setting: 3.8/5

Aside from a rudimentary college expenses lookup, this robo advisor platform doesn’t really have a lot of goal setting tools available. However, once you’ve defined your goal , the what-if analysis capabilities allow you to modify the plan by changing your retirement age or monthly savings. You’ll also check out the potential impact of changes in market returns. The dashboard built into the web site and mobile app gives you a swift update on your performance so far. 

There are additional goal-setting capabilities for the premium product, including unlimited access to financial planners. it might be nice to ascertain a more robust set of options for all accounts that goes beyond the fundamentals. The analysis capabilities and tools suggest that the logic is already there to permit interested clients to supply more detail and obtain a better-targeted portfolio.

Account Services: 3.8/5

Charles Schwab Intelligent Portfolios has a nice array of account services on offer. Tax-loss harvesting is out there for clients with at least $50,000 in their Intelligent Portfolios account, and they need to enroll in the service to enable it. The tax-loss harvesting is completed by the algorithm in conjunction with the regular portfolio rebalancing. Basically the program identifies securities to sell at a loss and replace with similar securities that fit an equivalent portfolio requirement. The program is meant to evolve to the wash-sales rules.

Schwab clients can also avail a cash management account, which offers checking and debit cards. It’s worth noting that there’s no margin available, and you can’t borrow against your portfolio. The interest paid on cash is 0.7%. If you’d wish to trade individual stocks or ETFs, you’ll need to open a separate account.

Portfolio Content: 2/5

Charles Schwab Intelligent Portfolios are made from ETFs, the bulk of which are managed by Schwab. Schwab doesn’t offer a socially responsible portfolio option or other customization beyond matching a portfolio to your risk tolerance and stated goals. The interesting thing about Intelligent Portfolios is that the asset classes reach beyond stocks and bonds and into land investment trusts, high yield corporate bonds and precious metals. Including the more risky asset classes enhances the market diversification of Intelligent Portfolios.

Portfolio Management: 4/5

As mentioned in account services, the Intelligent Portfolios are rebalanced by an algorithm that takes tax implications into account. A portfolio rebalance is triggered whenever the asset allocation drifts from its defined allocation. This could happen at any time depending on deposits, withdrawals and market activity. Accounts are monitored daily for drift.

User Experience: 4.5/5

Mobile Experience

All of the features found on the desktop site are enabled on the mobile device. The layout uses tiles on a mobile, while the tab version looks similar to the desktop site. The visuals are obvious and polished, making it easy for investors to  fast check-in with their money and enjoy fast performance with a minimum of searching.

Desktop Experience

Once you’re past that first text-heavy page, the workflow is smooth, and therefore the steps to follow are logically organized. There are visualizations to help with summarizing your portfolio and clear, clean menus to maneuver you through the necessary actions.

Customer Service: 4.8/5

There is online chat available and you have the option to speak to a financial advisor at any time for a fast one-on-one. Clients of the premium product have additional access to financial advisors. Technical support is available 24/7.

Education and Security:4.8/5

As you would expect from an established name in the field, Schwab has a large vault of resources and excellent security features. Intelligent Portfolio customers can choose from a wide variety of content available, which includes videos, online articles, podcasts (Choiceology and Financial Decoder), OnInvesting magazine, live webcasts and special events, market updates, and the Investing Insights blog. Mobile apps support fingerprint and face recognition while the website has advanced encryption security.

Commission and Fees: 4.8/5

One of the highlights of this robo advisor is the incredible fee structure.

  • Monthly cost to manage a $5,000 portfolio: $0 (Premium not available)
  • Monthly cost to manage a $25,000 portfolio: $0 (Premium $30/month plus $300 setup)
  • Monthly cost to manage a $100,000 portfolio: $0 (Premium $30/month plus $300 setup)

Charles Schwab eliminates fees as there will be some in the ETFs they offer. However, like all ETF fees, these are relatively minor and Schwab’s ETFs hold up well to the rest of the industry. Some will argue that this is a less transparent way of charging fees, but it is definitely a clear differentiator for Schwab regardless.

The Charles Schwab Corporation is a very famous American multinational financial services company. It was founded in San Francisco, California. Charles Schwab is the 14th largest American banking institution with client assets of over $Behind Blackrock and Vanguard, Charles Schwab is the third largest asset manager in the USA. The firm is known for its electronic trading platforms, investor education, and discount brokerage services, particularly reduced and free trading commission charges.

Founded as Charles Schwab & Co. in 1971 by its namesake Charles Schwab, the broker-dealer capitalized on the financial deregulation of the 1970s to pioneer discount sales of equity securities. After a flagship opening in Sacramento, the bank expanded into Seattle before the 1980s economic expansion financed the bank’s investments in technology, automation, and digital record keeping. The first to offer round-clock order entry and quotation, it was purchased by Bank of America in 1983 for $55 million. Three years later, the profitability of the bank’s no-charge mutual funds prompted the founder to buy his company back for $280 million. In line with the Digital Revolution, Charles Schwab offered online trading in 1994 which allowed them to drop and even eliminate account fees by 2005, and introduce commission-free funds by 2011.

Charles Schwab offers commercial banking, stock brokerage, and wealth management advisory services to both retail and institutional clients. Aside from the extensive online presence, Charles Schwab also has a huge network of physical branches which are located within the financial hubs of large cities. The firm has 345 branches spread over the USA and UK. Charles Schwab is well renowned for its corporate marketing programs, especially their electric blue nameplate, television commercials, and slogans. In 2020, the bank announced their intention to move to Texas in conjunction with their large-scale mergers and acquisitions of USAA (for $1.8 billion) and TD Ameritrade (for $26 billion), respectively.

The History of Charles Schwab Inc.

Charles R. Schwab and two other partners established Investment Indicator in the year 1963. It went  on to become quite a popular investment newsletter. The newsletter went on to peak at 3000 subscribers who were charged $84 for their subscription. Investment Indicator was rechristened and reborn in California as First Commander Corporation in 1971. It was an entirely owned subsidiary of Commander Industries, Inc.. it provided traditional brokerage services and published the Schwab investment newsletter. Charles Schwab and four others purchased all the stock from Commander Industries, Inc. in November of the same year. In the year 1972, Schwab acquired all the stocks from the erstwhile Commander Industries. In 1973, the company’s name was officially changed to Charles Schwab & Co. Inc.

In 1975, the U.S. Securities and Exchange Commission allowed for negotiated commission rates and Schwab established a stock brokerage. Schwab opened its first branch in Sacramento, CA in September of 1975 and started offering discount brokerage services. Schwab also started holding seminars for clients in 1977. The total number of client accounts had risen to 45,000 by 1978. That number almost doubled to 89,000 by 1979. In 1979, Schwab risked $500,000 on a back-office settlement system called BETA (which was short for Brokerage Execution and Transaction Analysis), enabling Schwab to become the primary discount broker to bring automation inhouse. In 1980, Schwab established the industry’s first 24-hour quotation service, and consequently the total number of client accounts grew to 147,000. By 1981, Schwab’s client accounts had gone past 222,000 and it officially entered the New York Stock Exchange. In 1982, Schwab became the first firm to supply 24/7 order entry and quote service, its first international office was opened in Hong Kong, and the number of client accounts raced past 374,000.

In 1983, Stephen McLin purchased  Schwab for Bank of America for $55 million. In 1984, the corporate launched 140 no-load mutual funds. In 1987, management, including Charles R. Schwab, bought the firm back from Bank of America for $280 million. In 1991, Schwab acquired Mayer & Scweitzer, a popular and successful market making firm. This helped Schwab execute its customers’ orders without sending them to an exchange. In 1997, it had been fined $200,000 for failing to rearrange the simplest trades for its customers. The unit was renamed Schwab Capital Markets in 2000. In 1993, Schwab opened an office in London, its first in Europe.

In 1995, Schwab acquired The Hampton Company, founded by Walter W. Bettinger, who became CEO of Schwab in 2008. In 1996, Web trading went live. Customers had the option to trade listed and OTC stocks, or check balances and the status of orders on the schwab.com website. In 1998, dissatisfied by the in-house results, Schwab hired interactive firm Razorfish to revamp the web site . Years later the web site would be entered into the Cooper-Hewitt Museum’s inaugural National Design Triennial. In 2000, Schwab purchased U.S. Trust for $2.73 billion. In 2001, a year after the acquisition of U.S. Trust, the U.S. Trust subsidiary was fined $10 million as a part of a bank secrecy case. It had been ordered to pay $5 million to New York’s State Banking Department and $5 million to the Federal Reserve System Board. On November 20, 2006, Schwab announced an agreement to sell U.S. Trust to Bank of America for $3.3 billion in cash. The deal was completed during the second quarter of 2007.

In January 2004, Schwab acquired SoundView Technology Group for $345 million to feature equity research capabilities. David S. Pottruck, who had spent the bulk of his 20 years at the brokerage as Charles R. Schwab’s chief assistant , shared the CEO title with the company’s founder from 1998 to 2003. Charles Schwab stepped down from the CEO position in May 2003 and David Pottruck became the sole CEO. However, Pottruck was fired from the firm on July 24, 2004 by the company’s board, replacing him with its founder and namesake. Pottruck’s dismissal was accompanied by the disappointing news of a drop in the overall profit by 10%, to $113 million, for the second quarter, driven largely by a 26% decline in revenue from customer stock trading.

After getting back at the helm, Charles Schwab conceded that the firm had “lost touch with its heritage”, and quickly refocused the business on providing financial advice to individual investors. He also rolled back Pottruck’s fee hikes. The firm rebounded, and earnings began to show a turnaround in 2005, as did the stock. The share price was up as high as 151% since Pottruck’s removal, ten times since the return of Charles Schwab. The company’s net transfer assets, or assets that come from other firms, quadrupled from 2004 to 2008. Schwab’s YieldPlus fund drew controversy during the 2007 financial crisis due to its -31.7% return. Investors within the Schwab YieldPlus Fund, including Charles Schwab himself, lost $1.1 billion. Schwab closed the YieldPlus funds in 2011. In April 2007, the firm acquired The 401(k) Company. On July 22, 2008, Walter W. Bettinger, the previous chief operating officer, was named chief executive, succeeding the company’s namesake. Charles R. Schwab remained executive chairman of the firm and said that he would “continue to function as a very active chairman”. In 2011, Schwab acquired OptionsXpress. Schwab also acquired Compliance11, Inc., a provider of compliance software. In 2012, it expanded again by acquiring ThomasPartners, an asset management firm. On July 26, 2019, the firm announced it might acquire USAA’s investment management accounts for $1.8 billion in cash.

On November 25, 2019, Schwab announced its intent on acquiring TD Ameritrade for about $26 billion. On February 24, 2020, the firm announced it might acquire Wasmer, Schroeder & Company in an all cash purchase. 

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