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Portfolio > Portfolio Construction

Schwab Ruled the Robo Roost in Q3

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Schwab Intelligent Portfolios was the top performing robo-advisor for the third quarter, according to BackEndBenchmarking’s latest Robo Report, which tracks the performance of a 60/40 stock/bond portfolio for investors in a high tax bracket.

Its model portfolio for taxable accounts outperformed comparable portfolios of 19 other robos, gaining 3.97% in the third quarter, according to The Robo Report, which actually invests in the model portfolios it analyzes.

(Related: Which Robo-Advisors Are Best? To Find Out, an RIA Invests in Them)

Betterment placed second for the third quarter followed by SigFig and SoFi, which tied for third place, but it led the competition for one-year performance ended Sept. 30, up 11.97%. Schwab was just behind, with an 11.93% return for its model portfolio.

TD Ameritrade led performance year to date through Sept. 30, up 11.81%.

(Related: Vanguard Is Way Ahead in the Robo Race)

Schwab Intelligent Portfolios, with roughly $23 billion in assets, is the second largest robo-advisor after Vanguard Personal Advisor Services, which has more than $80 billion in assets.

In addition to its outperformance for the third quarter, the Schwab model portfolio was also the least risky, based on its standard deviation and Sharpe ratio for the year ended Sept. 30. It had the lowest standard deviation and highest Sharpe ratio, which topped 3, a level considered “excellent.”

(Related: Who Were the Best Robo-Advisors in Q1?)

The Schwab portfolio captured 105% of the market’s upside but just 77% of its downside.

Source: BackEndBenchmarking

Despite those readings, The Robo Report is reserving judgment on the Schwab portfolio until it sees how it performs in a down market, according to the report. It notes that Schwab’s fixed income allocation, which outperformed in the third quarter, year to date and over a  year, is “heavily invested in historically riskier assets,” in international and high-yield bond funds.

Schwab’s bond allocation in the model portfolio gained 1.53% in the third quarter and its equity allocation returned 3.97% — both beating comparable allocations by any other robo-advisor tracked by the report.

The Schwab robo model portfolio also outperformed that of Betterment, the only other robo that had two-year performance numbers, according to The Robo Report. The Schwab portfolio gained almost 26% while Betterment’s returned almost 22%.

Performance, however, is just one measure for investors to use when choosing a robo-advisor. Financial planning, online tools, account updates and guidance on how to meet investors’ goals are also crucial, according to The Robo Report.

Schwab also outshines in those areas, according to a new report from MyPrivateBanking Research, which measures robos based on client services, including financial planning, as well as portfolio management. It ranked Schwab Intelligent Portfolios and Schwab Intelligent Advisory, its robo for financial advisors, the number one robo-advisor in the U.S. 

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