Charles Schwab Corp. (SCHW) made a big splash with the recent introduction of its robo-advisor service, Schwab Intelligent Portfolios. The debut stirred critical reactions from at least two big players in the robo-advisor space, Betterment and Wealthfront. (For more, see: Schwab's New Robo Advisor.)

At about the same time as the launch of Intelligent Portfolios for individual investors, Schwab’s Executive V.P. of Advisor Services Bernie Clark sent a letter to financial advisors who custody with Schwab indicating that a registered investment advisor-specific automated service, Institutional Intelligent Portfolios, will launch in the second quarter of 2015.

We have been working closely with advisor groups over the past year to shape the design of our offer so that it meets those needs. Institutional Intelligent Portfolios will allow advisors to modify asset allocations and customize portfolios from a pool of eligible ETFs. Advisor pricing options will be available, including one with no program fee, and the solution will allow advisors to apply their firms’ branding to the platform, Clark said. (For more, see: Schwab's New Robo-Advisor Service Explained.)


Schwab was a pioneer in developing the model where independent financial advisors custody their assets with an independent custodian that is now widely used by Fidelity Investments and TD Ameritrade, among others. Over the years as Schwab has ventured into its own advisory unit many financial advisors have felt like it was infringing on their turf. 

Both Schwab’s timing of the announcement of Intelligent Portfolios as well as Institutional Intelligent Portfolios was well-orchestrated from the standpoint that it didn’t give advisors who custody with it any reason to feel they were being left out of this additional tool to work with emerging investors and others who may not meet their traditional minimums. (For more, see: How Technology Helps Financial Advisors.)

Keeping Pace

On one level Schwab Institutional Intelligent Portfolios allows Schwab Institutional to keep pace with competitors Fidelity and TD Ameritrade in offering a robo-advisor solution for financial advisors. Fidelity has formed partnerships with robo firms Betterment and Learnvest to allow advisors who custody via Fidelity’s institutional group to offer these services to their clients. This gives advisors an instant online service that they can use to service millennials and other emerging investors who might otherwise not meet their minimums.

Time will tell how this plays out for Fidelity but it does show a commitment on its part to helping advisors expand their practices. TD Ameritrade has taken a different approach with its open architecture Veo platform that allows advisors to essentially mix and match robo providers and some services that TD offers to build their own robo-advisor offering. (For more, see: A Financial Advisor's Guide to Millennial Clients.)

Schwab Institutional has long been a pioneer in helping independent financial advisors build their businesses via back-office services and by offering one of the broadest investment lineups available. In recent years both Fidelity and TD Ameritrade have also grown their institutional services for financial advisors and are very viable competitors. Schwab needed to offer an institutional robo-advisor solution if for no other reason than to keep pace with its competitors. 

"There’s a lot of interest among advisors for automated investment management solutions, Institutional Intelligent Portfolios will enable RIA firms to manage client assets efficiently, serve new and existing clients, and help them grow their businesses in a scalable way,” Schwab Executive V.P. Naureen Hassan said in a press release. (For more, see: A Guide to Choosing the Best Robo Advisor.)

In my opinion the next evolution in the robo-advisor space would seem to be services offered by financial advisors to cultivate relationships with clients who may not meet their traditional minimums and/or who prefer this type of arrangement. Putting the resources of Schwab behind this service and allowing financial advisors what appears to be an almost turnkey entrée into this space makes sense for Schwab. (For more, see: What's Next for the Robo-Advisor Space?.)

The Bottom Line

The introduction of Institutional Intelligent Portfolios will add to Charles Schwab's presence in the online financial advisor space as well as increase its suite of services for independent financial advisors. (For more, see: How Financial Advisors Can Adjust to Robo Advisors.)

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