Schwab Intelligent Portfolios 2020 Updates: Is it Worth It?

If are you looking for fee-free Intelligent Portfolios that are competent and offers a wide range of its own ETFs, Charles Schwab is your option. The service also offers tax-loss harvesting, which is a big plus. 

Schwab Intelligent Portfolios was established by the Charles Schwab Corporation, a firm that has an impressive $3.25 Trillion worth of Assets Under management (AUM) and has been around since 1971.

However, their entry into the field of automated investing is proof that Robo Advisors should be taken seriously. This offers low fees and great returns even without the touch of a human advisor.

In fact, the Schwab robo advisor is one of the very few completely free robo advisors on the market. Never jump on the chance to open an account right away, just because fees are not charged.

What Is Schwab Intelligent Portfolios?

Similar to other popular robo advisors, Schwab Intelligent Portfolios is a professionally managed, fully automated investment portfolio. Your portfolio will be allocated based on your risk profile, ranging from conservative to moderate, to aggressive.

The portfolio will be rebalanced daily as necessary. Tax-loss harvesting is available on accounts with a minimum balance of $50,000.

Also take advantage of all the investment options that are available at Schwab Intelligent Portfolios.

Even more, the company is a full-service discount brokerage firm and one of the largest in the world. It has almost $3 trillion in client assets under management.

It also offers a virtually unlimited selection of investments, including exchange-traded funds (ETFs), mutual funds, bonds and other fixed-income investments. They also include options, real estate investment trusts (REITs) and commodity-based investments.

Stocks and options can be traded at just $4.95 per trade. This is one of the lowest commissions in the industry.

It’s possible to have Schwab Intelligent Portfolios managed for you while also maintaining a self-directed portfolio with the same broker.

Pros and Cons of Schwab Intelligent Portfolios

Pros

  • No management fees
  • The platform includes a very easy-to-use website and app
  • A standard account holder can switch to the premium level once the account minimum has been attained
  • Schwab’s education offerings and library of resources are available to Intelligent Portfolio clients

Cons

  • The portfolio is not revealed until the account is funded, and it is not customizable
  • The platform requires higher-than-average cash balances
  • Portfolio contents focus on Schwab-managed ETFs, which do generate fees for Schwab
  • Little goal-planning help available

How Schwab Intelligent Portfolios works

Schwab Intelligent Portfolios lets investors put their money to work in a portfolio of exchange-traded funds, or ETFs.

However, these allow for diversified exposure to stocks, bonds, and other asset classes, and with a bare minimum of expense. Schwab uses just over 50 different ETFs in its automated portfolios, many of which are Schwab’s own funds.

Basically, investors complete a short questionnaire that helps Schwab determine their risk tolerance and investment objectives. After that, robo-advisor does the rest.

Charles Schwab Intelligent Portfolios Features

Minimum Investment $5000
Fees None
Accounts
  • Taxable
  • Joint
  • Traditional IRA
  • Roth IRA
  • Rollover IRA
  • SEP IRA
  • SIMPLE IRA
  • Trusts
  • Custodial
401(k) Assistance
Tax Loss Harvesting
Portfolio Rebalancing
Automatic Deposits
 Monthly, Bimonthly and Quarterly
Advice Automated
Smart Beta
Socially Responsible
Fractional Shares
Customer Service Phone: 24/7; Live Chat: 24/7; Email

One of the biggest advantages with Schwab Intelligent Portfolios is being part of the Charles Schwab family. As one of the largest investment brokerages, Schwab also offers everything you need to invest.

However, the customer service is among the best in the industry. And it provides you with full access to investment professionals, round the clock. The platform also has a wealth of educational resources and investment tools.

Schwab Intelligent Portfolios Fees

Investment managent fees come from two distinct sources:

  • The individual investment fund management fee or ETF expense ratio. Every exchange traded or mutual fund charges a management fee. This money goes directly to the fund manager. The fund management expense ratios range from .06% to .65% of AUM. While the average total portfolio expense ratio is roughly .13% of AUM.
  • Portfololio managment fees are charged by Schwab, to manage your Schwab robo-advisor.

However, as earlier said the basic Schwab robo-advisor does not charge account management fees. The only charges you will pay are those management expesnse fees levied by the fund companies.

However, the Schwab Intelligent Portfolios Premium fees are levied with a subscription model. This is better and less expensive, the larger your portfolio.

The Schwab Portfolios Premium fees are:

  • $300 one-time set up fee
  • $30 per month management fee

Your investment management fees vary based upon the size of your portfolio.

Account Balance $360 per Year Fee as a Percent of Total Assets (charged $30/month)
$25,000 1.44%
$50,000 0.72%
$100,000 0.36%
$300,000 0.12%
$500,000 0.07%

If your assets are below $50,000, the fee is high relative to Betterment and Ellevest, who charge .40% or .50% respectively. This is for their premium services with financial advisor access.

Once your assets reach $100, the Schwab robo-advisor subscription charge is very economical. This is when compared with both typical financial advisors and other robo-advisors.

Read Also: 5 Best Robo-Advisors of 2020: You Need to Know About

How Does Schwab Intelligent Investing Make Money?

Schwab’s Intelligent Portfolio Premium subscription fee predominantly goes to fund their cadre of salaried Certified Financial Planners®.

Both robo-advisors also make money from two additional sources:

  1. Schwab earns revenue from a small management fee for the Schwab ETFs and revenue on some 3rd party ETFs.
  2. The cash portion of your account is held in the Schwab bank. Thus they profit from the access to your money, such as for lending and more.

Alternatives to Consider

There’s no one perfect robo-advisor for everyone, and there are alternatives that could better suit certain investors. However, here’s an alternative to Schwab Portfolios that offers some benefits and features you won’t find in Schwab’s platform.

However, check out our list of the best robo-advisors homepage to compare Schwab Intelligent Portfolios with even more alternatives.

Feature Schwab Intelligent Portfolios SoFi Automated Investing
Advisory Fees 0% 0%
Automatic Rebalancing Yes Yes
Tax-Loss Harvesting Yes No
Access to Financial Advisors No Yes
Account Minimum $5,000 $0

Is Schwab Intelligent Portfolios Right for You?

The free all-digital advisory service offered using the standard plan is a solid offering for those that are cost conscious.

Also, if you’re already a Schwab client, getting started is extremely simple. Essentially Schwab is offering a portfolio that you can invest in and forget about for most of the year. They will take care of the reallocation, the tax maneuvering and everything else.

Of course, they also set the portfolio for you and your influence is limited to the survey.

Final Say

With diverse portfolios and progress tracking tools, Schwab Intelligent Portfolios offers many services at low fees. You’re able to have some control over your investment portfolio as well as track your long-term goals.

We hope this article has been helpful for you. Please share it with anyone who you think will appreciate the information!

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