Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Portfolio > Portfolio Construction

Schwab Rolls Out Subscription-Based Financial Advice

Your article was successfully shared with the contacts you provided.

Charles Schwab is following in the footsteps of Apple, Amazon and Netflix, rolling out a subscription model for some of its services.

Schwab Intelligent Advisory will be renamed Schwab Intelligent Portfolios Premium and will cost $30 a month rather than 0.28% of assets each year; it includes “unlimited” support from a certified financial planner, a $25,000 investment minimum and a $300 initial planning fee.

Financial advisors and tech bloggers, like Michael Kitces and Bill Winterberg, were quick to comment on the importance of the development. “Wow, HUGE news,” Kitces said on Twitter.

“The growth of financial planning is about to accelerate, quickly!” he added. Though the premium service includes unlimited access to a CFP professional, it “ostensibly is still investment-centric,” he continued in another tweet.

Investors using rival Vanguard’s Personal Advisor Services (launched in 2015) are charged 0.30% per year and have a $50,000 minimum — which means an annual charge of $150, less than half of the $360 yearly fee for Schwab’s new service. At a higher asset level of, say, $150,000, the Vanguard PAS fee jumps to $450 a year — above Schwab’s new premium service.

“Wow, former @betterment exec Cynthia Loh leads pricing overhaul at @CharlesSchwab Intelligent Advisory to cut AUM-based fees and transition to $30/month subscription!” said CFP Bill Winterberg on Twitter.

“For $30/month, I can get a Tier 3 subscription to my favorite @Twitch streamer, -OR- I can get ongoing access to CERTIFIED FINANCIAL PLANNER™ professionals and automated investment management services,” Winterberg quipped.

According to Loh, Schwab’s vice president of digital advice and innovation, subscription-based pricing is “second nature to many of us … from streaming media services to fitness and personal training memberships. We think people should have the opportunity to pay for financial planning the same way.”

Loh has been with Schwab since September 2017. Earlier, she was with robo-advisor Betterment. “These changes are a result of client feedback and our commitment to meet consumer expectations for simplicity, transparency and value,” she added.

Those using the premium service also will pay operating expenses on the ETFs in their Schwab Intelligent portfolios, which include Schwab ETFs and funds from outside providers. They will not, though, pay commissions.

Advisors should pay attention, Kitces says.

“From the individual advisor’s perspective, though, this further emphasizes why niches and specialization will be crucial, even/including in new fee-for-service models. Solo advisors cannot compete on price/scale w/ Schwab. MUST compete on differentiated value at higher fee level,” he tweeted.

Industry consultant and former Schwab executive Tim Welsh echoed this warning.  “Once again, Schwab is setting the floor for pricing on advice, creating more challenges for advisors to be able to justify their 1% fees,” he said in an interview.

The $30-a-month service “will be a tough price point for advisors to now have to swallow, as it will show up on billboards and the Sunday afternoon golf matches via TV advertising,”  the head of Nexus Strategy explained. “Advisors custodying with Schwab will have some tough explaining to do!”

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.