With its announcement of a new flat-fee subscription pricing model for a premium digital advisory service, Schwab once again stands out as an innovator and disruptor in the retail investment space, one that others may follow.
“Schwab Introduced discount brokerage when there were fixed commission rates in mid-’70s, then shifted discount platform to serve retail-based RIAs and now is going direct to consumer another way to capture clients,” says Mark Tibergien, CEO of Pershing Advisor Solutions.
Under its new pricing model, Schwab Intelligent Portfolios Premium — formerly known as Schwab Intelligent Advisory — will charge a flat $30 monthly fee after a one-time $300 fee instead of 0.28% of assets, starting April 1. (Current account holders won’t have to pay the $300.) The account minimum remains the same, at $25,000, as do the investments, which are a mixture of 53 ETFs from Schwab and other asset managers, and subscribers will receive a comprehensive financial plan with a customized roadmap and unlimited one-to-one guidance from a CFP professional.
The change “is important because Schwab is a significant retail brand,” says Tibergien, noting that the firm also has the capital to advertise and market the repriced service.
“It’s a very big deal as thus far the adopters of monthly subscription fees have been advisory firms and hybrid broker-dealer enterprises themselves,” says Michael Kitces, industry commentator and co-founder of the XY Planning network, which instituted subscription pricing five years ago. “Schwab is implementing this in a more direct-to-consumer offering.”