Discount broker giant Charles Schwab announced at its annual IMPACT meeting of independent financial advisors that it is making numerous additions and upgrades to its Institutional Intelligent Portfolios, which are automated robo-advisors designed for use by advisors and sponsored by Schwab Wealth Investment Advisory, Inc. The chief improvement among these changes is the upgraded portfolio customization, which will provide advisors with increased flexibility when they design their clients’ portfolios based upon their own investment philosophies. Advisors will be able to create up to 45 separate asset classes that they define themselves, and will have more than 950 ETFs to choose from for each class. The firm will also make the account opening process for customers easier and more flexible.

Other changes include new ways to fund client accounts such as the journal transfer of assets as well as avenues for companies to manage multiple Intelligent Portfolio accounts at once. Schwab will also introduce a new and improved app for smartphones and tablets early next year that will have more streamlined navigation and an enhanced client interface. Jessica Heffron, the vice president of client experience for Schwab Advisor Services, told that “Automated investment management continues to be an important and evolving trend in our industry. Our research shows that advisors are optimistic that this technology can help scale their businesses and allow them to stay competitive in the marketplace. Most advisors tell us that the biggest opportunity for automated investing tools is to more efficiently serve smaller accounts or reach clients that their firms have been unable to serve before. Since launching Institutional Intelligent Portfolios in 2015, there has been a lot of interest in automated investing solutions, but launching a more digitally-based solution is proving to be a significant strategic endeavor. The technology is only a piece of complex equation. Even advisors who are early adopters are approaching it judiciously in terms of implementation. Those advisors who are already out in front on this opportunity are using a ‘test and learn’ approach and are ready to modify strategies and assumptions as this trend continues to unfold in the market.” (For related reading, see: Are Robo-Advisors an FA's Worst Nightmare?)

Advisors' Attitudes Toward Digital

During their IMPACT event, one of the programs that Schwab hosted was a user panel discussion about the Institutional Investments Portfolios and how they work. Three users of the program provided details to advisors about how they built or increased their business using the platform. Schwab also released the results of a survey taken of 500 financial advisors in all sectors of the market, from independent advisors to insurance and wirehouse producers. The results of the survey included:

  • About 60% of advisors believe that they can reach additional markets and expand their businesses through the use of automated investment platforms.
  • More than 80% of advisors plan to provide their customers with pricing that is based on assets and 64% of these advisors said that their automated model would be cheaper than their standard model.
  • A low percentage of advisors plan on going completely digital. Most advisors plan on coupling their automated investment services with regular client interactions in order to provide a more holistic experience.

The Bottom Line

Schwab’s enhancement of its Institutional Intelligent Portfolios will allow advisors to create portfolios that more closely match their own investment philosophies. The new features will provide both advisors and clients with the increased ability to choose funds and manage their money; it also demonstrates Schwab’s commitment to providing its customers with top-quality products and services. (For related reading, see: The 5 Best Robo-Advisors for Investors in 2016.)

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