Schwab’s new subscription-based digital advisory service is a big hit, attracting $1 billion in new assets under management since it was introduced a little over three months ago.
Schwab Intelligent Portfolios Premium, introduced March 28, has also seen a 25% increase in account openings, a 40% increase in average household assets enrolled and a 37% rise in new-to-Schwab household enrollments.
“It’s clear from these early results that we’ve struck a chord,” said Cynthia Loh, Charles Schwab vice president of digital advice and innovation, in a statement. “Today’s consumers expect simplicity, transparency and value — and how they invest should be no different.” She noted that Schwab created the new service as a direct result of client feedback about its pricing approach.
Schwab Intelligent Portfolios Premium charges a flat $30 monthly fee, billed quarterly, after a one-time $300 fee for unlimited one-to-one guidance from a certified financial planner, though not necessarily the same advisor at different times, and a comprehensive financial plan that provides a customized roadmap for investors to reach their financial goals.
It is essentially a new pricing model for what was previously known as Schwab Intelligent Advisory, which charged a 0.28% advisory fee. The service requires a $25,000 minimum, and provides access to a mixed of over 50 ETFs from Schwab and other asset managers plus access to an FDIC-insured deposit at Schwab Bank.
This pricing regime “lowers the barrier for many consumers that would benefit from financial planning by making it very easy to understand from a service and pricing perspective,” said Alois Pirker, research director for Aite Group’s Wealth Management practice, in a statement. “Consumers are expecting to tailor services to their needs and pay based on consumption. Schwab is at the forefront of this change.”
Pirker tells ThinkAdvisor, “The new frontier will be scalable advice and planning delivered to clients that are not the millionaires but those that have tens of thousands of dollars or several hundred thousand dollars in investable assets.”
Schwab has “seen many new clients sign up who knew they needed help with financial planning but hadn’t found an advisory model that fit them — either because they prefer a more digital approach, are cost-conscious, or find traditional planning services overly complex,” Loh said. “These investors were managing their investments on their own but not necessarily by choice, so we’re excited to give them a new way to get the help they need.”
Pirker tells ThinkAdvisor that advisors should take notice of the appeal of the Schwab subscription model, not only for its price for for its focus on planning, which many advisors offer primarily to clients with $1 million or more in investable assets since they charge fees based on AUM.
One of the biggest hurdles for advisors now, says Pirker: learning how to segment the practice for planning and investment advice outside the AUM model.
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