The competition between Schwab and Fidelity’s digital advisor platforms is also playing out in the digital advisory market. The two financial giants are among a limited number of firms that have operated robo-advisor platforms for several years, but their performance is far different.
According to the third-quarter 2020 Robo Report, Schwab Intelligent Portfolios was the worst performing robo-advisor for taxable accounts during the three and four years ended Sept. 30.
The performance metrics are based on a 60/40 stock/bond taxable portfolio that Backend Benchmarking, publisher of The Robo Report, has funded, usually at the minimum required asset level.
Schwab Intelligent Portfolios’ balanced portfolio returned 3.21% on an annualized basis over the three years ended Sept. 30 and 5.33% annualized over the four years ended Sept. 30. Fidelity Go, in contrast, returned 6.34% and 7.60% annualized, respectively, over the same time periods.
Schwab’s underperformance was due to an equity asset allocation that tilts toward value with an outsize weighting of small-caps plus a roughly 10% allocation to cash, according to The Robo Report. Fidelity Go’s stock portfolio, in contrast, tilts toward large-caps and its cash allocation is minimal. Its four-year performance topped all other equity portfolios tracked by The Robo Report.
On the fixed income side, however, Schwab was on top for performance while Fidelity was near the bottom. Schwab’s bond portfolio returned 4.24% on an annualized basis over the four years ended Sept. 30 due to significant allocations to mid-duration Treasury inflation-protected securities combined with emerging market bonds, high-yield corporates and munis, according to The Robo Report.
Fidelity Go’s bond portfolio placed next to last over the four-year period, gaining just 2.6%. Its entire fixed income portfolio for taxable accounts consisted of two municipal bond funds, according to The Robo Report. Its fixed income allocation for IRAs, however, was more broad-based and Treasury-focused and significantly outperformed its taxable bond portfolio counterpart.
Aside from their differences in performance, both Schwab and Fidelity introduced free financial planning tools in the third quarter — tools that can work in concert with their digital advisor accounts or as standalone offerings.
Schwab Plan helps investors build a personalized financial plan via a short questionnaire that incorporates information about desired retirement age and goals, Social Security expectations, risk profile, asset allocation and income. Fidelity Spire is a free mobile app designed to help young adults achieve their financial goals.