Charles Schwab Introduces a “Hybrid Robo”
Charles Schwab has launched a hybrid digital service that combines human financial planners with automated portfolio management.
Known as Schwab Intelligent Advisory, it provides online tools for users to create a financial plan before meeting to discuss it by phone or online with a certified financial planner (CFP). Introduced on Tuesday, the new service supplements Schwab’s no-fee pure “robo” product known as Intelligent Portfolio.
Intelligent Advisory accounts require a $25,000 minimum investment, five times higher than on Schwab’s pure robo product, and are assessed an annual advisory fee of 28 basis points on assets, capped at $900 each quarter. There are no limits on consultations with Schwab planners, and prospects can use the planning tool without committing to become a client.
The move comes as high-end money managers, full-service firms and discount brokers are expanding their service models to appeal to a range of investors with different net worths and appetites for automated investing.
Wirehouses such as Wells Fargo Advisors, UBS Wealth Management and Merrill Lynch that generally will not pay brokers on accounts of less than $100,000 to $250,000 are introducing inexpensive robo platforms for low-end clients or children of current clients, while money management giants such as Vanguard Investments already offer a hybrid robo product for 30 basis points.
Alois Pirker, research director at consulting firm Aite Group Wealth Management, praised Schwab’s move to go a bit upscale by adding an advice component to its automated investing platform.
“It’s getting the mix right,” he said, “which is what firms are challenged to do these days.”
The San Francisco-based firm is introducing the new product just two months after Betterment, one of the pioneers of the pure robo advice movement, announced two hybrid plans. One has an account minimum of $100,000 and charges .40% and the other premium service has a minimum of $250,000 with an annual fee of 50 basis points. Betterment’s plain-vanilla service charges .25% of assets.
“We haven’t seen the end of this yet. We’re still seeing that space evolve as an industry,” said Pirker.