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Investors looking to avoid paying account management fees should take a serious look at Schwab Intelligent Portfolios. This fully-automated investment solution is a rare treat in the industry as firms generally make money from charging management or monthly flat fees.
In 2015, Charles Schwab, one of the world’s largest brokerage firms, launched its Schwab Intelligent Portfolios investing solution and shook up the industry with its fee-free advisory offering. A few years later, the firm expanded its services with the Schwab Intelligent Portfolios Premium product, giving investors access to financial experts.
This review focuses on Schwab Intelligent Portfolios. We will take a look at its two Intelligent Portfolios solutions, portfolio types, and vast range of features. After that, we will look at the costs and fees, pros and cons, and who should use the platform, helping you understand if Schwab Intelligent Portfolios is right for you.
on Charles Schwab’s website
Quick Summary: Schwab Intelligent Portfolios is a robo-advisor part of Charles Schwab, an American multinational financial services company. The robo-advisor offers a wide selection of ETFs, automatic rebalancing, and tax-loss harvesting.
What Is Schwab Intelligent Portfolios?
Schwab Intelligent Portfolios is Charles Schwab & Co.’s automated, all-electronic investment advisory solution. The core of the online service is a robo-advisor that takes care of investing for you. The robo-advisor builds your portfolio, monitors it daily, and automatically rebalances it as needed.
The standard service is perfect for beginner and IRA investors who want to invest in a portfolio of low-cost exchange-traded funds (ETFs) and bypass advisory and management fees as well as commissions that come with hiring a financial advisor.
Next to the robo-advisor, investors can also get unlimited access to Schwab’s certified financial planners. This financial planning service is Schwab’s premium service and comes at additional charges. While the fee-free standard offering requires a minimum investment of $5,000, the premium service requires a $25,000 minimum balance, a $300 planning fee, and a $30 monthly fee.
How Does Schwab Intelligent Portfolios Work?
Schwab Intelligent Portfolios is perfect for investors that want to let a platform do the heavy lifting and spend as little time with their portfolio as possible. Choosing between two services, investors can decide how much help they need from Schwab’s financial planners. Thanks to its range of account types and features, Schwab offers every investor an opportunity for profitable investments.
Investing Account Types
Schwab Intelligent Portfolios offers up to ten different types of investing accounts to its customers. They are:
- Individual taxable brokerage account
- Joint taxable account with rights of survivorship
- Traditional IRA
- Roth IRA
- Rollover IRA
- SEP IRA
- SIMPLE IRA
- Custodial account
Opening an Account
You can open a Charles Schwab Intelligent Portfolios account on the broker’s website.
Like many other robo-advisors, Schwab Intelligent Portfolios asks you multiple questions about your financial goals, investing time horizon, asset class knowledge, and personal risk profile. Based on your answers, the broker will recommend a potential portfolio.
In the process, you can adjust several measures and immediately see the impact your adjustments have on your asset allocation and projected final balance. A few questions later, you can choose your portfolio orientation. You can go with the default globally-diversified portfolio or one that has more U.S. investment exposure. Keep in mind that the shown ETFs don’t have to be precisely the ones included in your portfolio.
From there, you select your Schwab Intelligent Portfolios solution (free or premium), start your account type, sign-up, and fund your account.
Schwab Intelligent Portfolios Features
Schwab Intelligent Portfolios offers many of the great features a complete robo-advisor should have. Their two investment packages utilize low-cost ETFs and don’t charge any fees. Investors who want to upgrade to the premium model (at additional cost) also get valuable access to other personal advisory services.
Schwab’s unique features include portfolio customization, automatic rebalancing, tax-loss harvesting, and more.
|Minimum Investment||$5,000 (Schwab Intelligent Portfolios) and $25,000 (Schwab Intelligent Portfolios Premium)|
|Fees||$0 (Schwab Intelligent Portfolios) and $30/month (Schwab Intelligent Portfolios Premium)|
|Investment Types||Portfolios built from 53 ETFs representing 20 different asset classes|
|Account Types||Individual Taxable, Joint Taxable, Traditional IRA, Roth IRA, Rollover IRA and SEP IRA, SIMPLE IRA, Trusts and Custodial|
|Assets Under Management||$40 billion|
|Socially Responsible Investing|
|Support||Live Chat, Phone and Email|
Schwab Intelligent Portfolios Standard
Investors can get fee-free investment services through the Schwab Intelligent Portfolios package (no advisory, management, or account fees). This automated passive investing package uses an advanced algorithm to tailor a handpicked ETF portfolio that perfectly fits your financial goals, risk preference, and investment horizon.
Your diversified portfolio will usually consist of multiple asset classes, including stocks, fixed-income securities, real estate, and commodities. Your asset allocation will also hold a portion of your portfolio as an FDIC-insured cash component stored at Schwab Bank, where it earns interest. To stay on track, your portfolio will be continuously monitored to ensure consistent diversification.
In addition, Schwab Intelligent Portfolios users can benefit from 24/7 live support from U.S.-based service professionals. Its live support answers general questions regarding your account either by phone or chat.
However, this service doesn’t include the firm’s comprehensive financial planning advice from certified financial planners. You must enroll in Schwab Intelligent Portfolios Premium to have access to them.
To start investing with Schwab Intelligent Portfolios, you must shell out a steep $5,000 minimum investment.
Schwab Intelligent Portfolios Premium
Schwab’s Intelligent Portfolios Premium package gives investors unlimited access to certified financial planners (CFP). The broker’s financial experts make recommendations in your best interest and help you prioritize and reach goals, create a plan, and find suitable portfolios.
Next to the free package services, investors get access to a robust and interactive planning tool to save for retirement, college, and other goals. With this tool, you can determine whether you’re on track to reach your goals using success probability indicators.
To receive unlimited guidance from Schwab Intelligent Portfolios Premium’s CFPs, you must have invested assets worth $25,000 or more and are charged a one-time $300 initial planning fee as well as a $30 monthly fee which is charged at $90 per quarter.
Schwab Intelligent Portfolios provides diversified portfolios composed of low-cost exchange-traded funds (ETFs), handpicked by Charles Schwab Investment Advisors. These investment experts use their professional insight to pare down more than 2,000 ETFs to 53 from across 20+ expanded asset classes.
The asset classes Schwab Intelligent Portfolios utilizes for its investor’s portfolios include stocks (U.S., developed markets, and emerging markets), fixed-income (primarily treasuries and various bonds), REITs (real estate investment trusts), and commodities. A fixed part of the diversified portfolios is also an FDIC-insured cash component.
The firm uses primary and secondary ETFs to facilitate tax-loss harvesting and draws their chosen ETFs from their range and third parties such as Vanguard or iShares. Schwab selects their ETFs based on a set of criteria, with low expense ratios being one of them. The following are the current asset classes offered by Schwab:
- U.S. large-company stocks
- U.S. large-company stocks–fundamental
- U.S. small company stocks
- U.S. small company stocks–fundamental
- International developed large company stocks
- International developed large company stocks–fundamental
- International developed small company stocks
- International developed small company stocks–fundamental
- International emerging markets stocks
- International emerging markets stocks–fundamental
- U.S. exchange-traded REITs
- International exchange-traded REITs
- U.S. high dividend stocks
- International high dividend stocks
- U.S. treasuries
- U.S. investment -grade corporate bonds
- U.S. securitized bonds
- U.S. inflation-protected bonds
- U.S. corporate high yield bonds
- International developed country bonds
- International emerging markets bonds
- Preferred securities
- Bank loans
- Investment-grade municipal bonds
- Investment-grade california municipal bonds
- Gold and other precious metals
- FDIC-insured cash
See Also: 7 Best Micro-Investing Apps
Cash Asset Class
Based on your provided risk profile, a portion of your Schwab Intelligent Investment portfolio is always swept to an FDIC-insured deposit account at Schwab Bank. The reason is that cash holdings serve multiple purposes. They give greater stability, liquidity, and diversification to your portfolio.
This cash portion makes up between 6 and 30% of your portfolio, depending on your risk tolerance. Risk-averse and short-term investors will have higher cash holdings, whereas aggressive, stock-heavy investors will hold less cash.
Under the Sweep Program, your cash allocation earns a market rate of interest for a highly liquid cash investment. Keep in mind that some cash alternatives outside of the program pay a higher yield.
Portfolio Customization & Flexibility
When investing with Schwab Intelligent Portfolios, the robo-advisor recommends a portfolio that suits your risk preference. However, you can already make a few changes in your portfolio when opening an account.
You can adjust the parameters of your investment goal. Investment value fluctuations, contributions, and your time horizon all influence your asset allocation. From there, you can opt for a globally diversified portfolio (Schwab’s default setting) or an asset allocation that features more exposure to U.S. investments.
Finally, you can replace or exclude up to three funds from your portfolio and Schwab will replace them with similar alternatives from their ETF list that contains around 53 ETFs overall.
A good robo-advisor service should always automatically rebalance your portfolio for you. This is important because disciplined rebalancing keeps your portfolio’s intended level of risk consistent.
Schwab Intelligent Portfolios’ technology monitors your investments daily and rebalances your portfolio only as needed. The rebalancing process starts when your asset class weightings have drifted off too far from the initial set-up. In that case, the robo-advisor sells positions with increased value and buys securities that underperformed to get back to a balanced portfolio.
Tax Loss Harvesting
A big perk in optimizing an investor’s portfolio regarding taxes is tax-loss harvesting. By applying this practice, your robo-advisor automatically sells securities that have experienced a loss. From there, this selling helps offset paying taxes on capital gains and income. Ultimately, the sold asset is replaced by a similar one to retain your optimal asset allocation.
Unfortunately, tax-loss harvesting is only available for clients with invested assets of $50,000 or more in their accounts. Investors must also choose to activate this feature before benefitting from it.
Schwab Intelligent Portfolios Goal Tracker
Schwab knows that planning and goal setting are key points for reaching your financial goals. For that reason, Schwab Intelligent Portfolios helps you project your portfolio’s hypothetical long-term performance with its Goal Tracker feature.
The Goal Tracker feature uses expected return estimates and simulates various outcomes (better, average, or worse), so you can control if you are on track or need to adjust your portfolio allocation to reach your financial goals.
Unlimited Access to Financial Planners
With its Intelligent Portfolios Premium model, Schwab enables its customers to get one-on-one guidance from certified financial planners. These financial experts have specialized training and must follow a code of ethics. This means they have to make recommendations based on your best interests.
Meetings with these certified financial planners are held via phone, email, chat, or video and can be scheduled with the same advisor if preferred. Premium clients further receive a written financial plan.
Local Branch Availability
Some investors prefer face-to-face meetings instead of contacting live support service professionals by phone or chat.
With more than 300 branches across the United States, Schwab can easily help in person with any question related to its Intelligent Portfolios offerings and other Schwab services.
Schwab Intelligent Portfolios Pricing and Fees
One area where Schwab Intelligent Portfolios shines is its pricing and fee structure. The elimination of any fees that usually come with an advisory service makes Schwab Intelligent Portfolios an attractive choice for hands-off investors with at least $5,000 to invest.
The cost to manage any account size is zero unless you enroll in the firm’s premium service. The only fees you have to pay are the operating expense ratios (OER) of Schwab’s (and third parties’) exchange-traded funds. However, these fees are low and have a weighted average of around 0.10%. Besides, investors will pay OERs at every broker, so they are not something only Schwab charges.
In contrast to the free service, Schwab Intelligent Portfolios Premium charges a monthly $30 flat advisory fee (billed quarterly at $90). Users of this service also have to pay an initial $300 planning fee upon enrollment. And if you have at least $25,000, you can switch to the premium service and benefit from added value.
Schwab Intelligent Portfolios Security
All Schwab Intelligent Portfolios accounts are protected by Securities Investor Protection Corporation (SIPC). The SIPC insurance covers up to $500,000 in account value, including $250,000 in cash claims. Remember, investment losses aren’t covered by SIPC protection.
Besides SIPC protection, Schwab Intelligent Portfolios provides FDIC coverage for the cash portion deposited at Schwab Bank under the Intelligent Portfolios Sweep Program. The FDIC insurance covers up to $250,000 per depositor.
Schwab Intelligent Portfolios Pros
- No direct fees such as management, account, or advisory fees for invested assets for Schwab Intelligent Portfolios
- Schwab offers a broad selection of low-cost ETFs from different asset classes to effectively diversify portfolios
- The firm provides various account types to invest in
- Automatic Rebalancing is practiced when the asset allocation drifts off too much
- Schwab lets investors customize their portfolios to a certain degree with the possibility to exclude up to three ETFs which is unique for robo-advisors
- Face-to-face contact at local Schwab branches and 24/7 live support via phone or chat from U.S. based service professionals
- Schwab provides an easy-to-use website and app
- Investors with account balances above $100,000 benefit from using the premium model because management fees become very competitive
Schwab Intelligent Portfolios Cons
- Schwab Intelligent Portfolios has a steep account minimum of $5,000 to get started
- Access to human advisors is only available for premium users
- Between 6 and 30% of your portfolio is held in cash which can be too much for younger investors and result in lower long-term returns
- Tax Loss Harvesting is only available for clients who have at least $50,000 in invested assets
- Schwab is the only broker that charges an upfront $300 planning fee which significantly increases first-year investing costs
Schwab Intelligent Portfolios Alternatives
If you prefer automated passive investing and robo-advisory services, Schwab Intelligent Portfolios provides excellent value. However, some alternatives also offer competitive benefits that include access to financial planners, no required minimum investments, and low or no management fees.
Betterment and Schwab Intelligent Portfolios both offer two plans to their investors, including access to financial advisors, and are similar in their features and account types. Their significant differences are management fees and minimum investments.
While Betterments digital and premium plans carry management fees (0.25% and 0.40% respectively), the digital service doesn’t require a minimum investment. This might appeal to investors that don’t have the $5,000 required at Schwab.
Betterment’s premium service requires a $100,000 account balance which is significantly more than what Schwab Intelligent Portfolios asks ($25,000) for its premium offering. And while their advisory fees are close, at balances of $100,000 with 0.40% for Betterment and 0.36% for Schwab, Schwab scores because their flat fee solution is favorable for even higher account balances.
Read our full Betterment review to learn more.
SoFi Automated Investing
Another alternative for investors who want to avoid paying management fees and can’t meet Schwab’s account minimum may be SoFi Automated Investing.
In contrast to Schwab, SoFi’s service only requires a $1 account minimum to get started. In addition, SoFi Automated Investing also offers unlimited access to human advisors. These are major advantages over Schwab Intelligent Portfolios.
Aside from that, their services are similar. They both use low-cost ETFs to build portfolios and don’t offer tax-loss harvesting to investors with small account sizes.
Read our full SoFi Automated Investing review to learn more.
Socially Responsible Investing
Assets Under Management
Socially Responsible Investing
Assets Under Management
Digital — 0.25%/yr and Premium — 0.40%/yr
1 year managed for free
Socially Responsible Investing
Assets Under Management
Who Should Get an Account with Schwab Intelligent Portfolios and Who Should Avoid It?
Beginner and retirement investors who want professional management of their investments without paying for it should take a look at Schwab Intelligent Portfolios. The free management service makes this an excellent solution for cost-conscious investors. The portfolio’s cash holdings might appeal to more conservative investors.
Schwab Intelligent Portfolios Premium is perfect for investors with account balances above $100,000. The flat-fee model works in your favor because the management costs become uber-competitive with higher account balances. Such a model is better suited for high-net-worth investors than percentage-based options like the ones at Vanguard or Betterment.
However, due to the steep minimum investment barriers, Schwab Intelligent Portfolios’ services aren’t for investors who can’t come up with the initial $5,000 minimum investment.
Schwab Intelligent Portfolios FAQ
Here, we will answer some frequently asked questions about Schwab Intelligent Portfolios.
Is Schwab Intelligent Portfolios Safe?
Schwab Intelligent Portfolios is part of Charles Schwab, one of the largest brokerage firms worldwide, which has weathered many financial storms.
All accounts are SIPC protected up to $500,000 account value, which includes $250,000 in cash claims. Additionally, Schwab Intelligent Portfolios provides FDIC coverage for the cash portion deposited at Schwab Bank.
Is Schwab Intelligent Portfolios Good for Beginners?
Schwab Intelligent Portfolios is a solid choice for inexperienced and cost-conscious beginner investors. The investment advisors at Schwab handpick the best-suited ETFs for the recommended portfolios and the robo-advisor takes care of everything else.
In addition, you pay no fees at all if you stick to the basic Intelligent Portfolios package. That way, you can steadily invest and learn more about the financial markets. And once you have a higher account balance and want a financial planner to help you reach your goals, you can go for the premium service.
Schwab Intelligent Portfolios is one of the best choices for robo-advisors on the market. It offers an array of account types to invest in. The robo-advisor will invest on your behalf as well as balance and keep your asset allocation as close as possible to your initial portfolio.
The broker is also one of the cheapest options for you. Using only low-cost exchange-traded funds for portfolio creation and not charging management fees or commissions, investors can keep more of their returns than at Schwab’s competitors.
Schwab’s Premium service is also priced competitively compared to a financial advisor and gives unlimited one-on-one access to certified financial planners that must act in your best interest. A minor downturn is the initial $300 planning fee that only Schwab charges.
With all the excellent features, some things could be changed. The most significant disadvantage is the required minimum amount of $5,000 to begin investing, which might be too pricey for many investors. Also, the cash allocation may not be suitable for young or new investors, and tax-loss harvesting is only available with an account balance of $50,000.
However, if you meet the required minimum investment and can live with a portion of your portfolio being held in cash, Schwab Intelligent Portfolios checks all the boxes for an ideal robo-advisor.
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Carsten is a Freelance Copywriter with a personal interest in money management and investing. Besides taking care of his investments, he loves traveling, reading books, and working out (calisthenics & yoga).