Schwab to Launch Hybrid Robo-Advisor Service

Schwab Intelligent Advisory is expected to launch in the first half of 2017

Charles Schwab greeting center at a Schwab Impact conference. (Photo: AP) Charles Schwab greeting center at a Schwab Impact conference. (Photo: AP)

Schwab is joining the growing number of firms offering a hybrid advisor/robo service for investors. The financial behemoth, which already has a robo-advisor service known as Schwab Intelligent Portfolios, announced on Tuesday plans to launch Schwab Intelligent Advisory, which combines the service of a “live credentialed professional and logarithm-driven technology.”

The announcement aligns with a pledge made by Schwab Advisor Services head Bernie Clark at the firm’s annual meeting with advisors in October: to continue to evolve. “If you’re growing, we’ll be here for you,” Clark told advisors.

The new hybrid robo service is expected to launch in the first half of 2017, joining other hybrid offerings from Vanguard, Merrill Lynch and Morgan Stanley.

According to Neesha Hathi, executive vice president with Schwab Investor Services, Schwab Intelligent Advisory is designed for “the emerging or mass affluent investor” who wants a low-cost personalized plan that achieves multiple financial goals.

“There’s an entire population of self-directed investors who aren’t self-directed by choice – they simply haven’t found an advisory model that works for them yet,” said Hathi. "There’s a real need to make financial planning and advice more accessible.”

The new service will make it easier for investors “to build and maintain a plan, stay invested and access professional guidance along the way,” said Hathi.

The minimum investment is $25,000, advisory fees are 0.28% of a client’s managed assets, topping out at a $900 quarterly maximum, and expense ratios range from 0.08% for a conservative portfolio to 0.24% for an aggressive one (a moderate portfolio has 0.19% fees).

The service includes a comprehensive financial and investment plan that starts with investors using a self-guided online planning tool to describe their financial situation and goals, followed by a one-on-one conversation with a credentialed planning consultant to review the plan, prioritize goals and discuss investment choices.

Investors can then access ongoing guidance from a planning consultant — all are certified financial planners — by phone or videoconferencing to discuss retirement planning, college savings, long-term care planning, budgeting etc., as needed. They will also have access to live service support 24 hours a day, seven days a week via phone, chat or email.

There is a possibility that the Schwab CFPs—who are not in branches—will refer robo clients to RIAs, but there are no plans to provide an institutional version of the robo to its RIAs, according to a Schwab spokesman.

Investment choices are the same as those offered by Schwab Intelligent Portfolios: 54 low-cost ETFs from Schwab and third-party providers including Vanguard, iShares and PowerShares, with access to up to 20 globally diversified assets, including stocks, bonds, real estate, commodities and cash. Clients can access automatic tax loss harvesting on accounts with $50,000 or more.

William Trout, who heads the wealth management practice at Celent, a research and consulting company focusing on technology in financial services, said the Schwab announcement “points to the ascendency of the hybrid model over a pure play stand-alone robo model like Wealthfront’s." In addition, he said, Schwab's Intelligent Advisory 0.28% fee undercuts the 0.30% fee charged by Vanguard's Personal Advisor Services.

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