Charles Schwab launched its Intelligent Portfolios offering in 2015 and made a splash with its zero-fee advisory service that has a minimum investment of $5,000. In March 2019, the firm launched a premium service that allows its customers unlimited access to one-on-one guidance from a certified financial planner who can produce a personalized action plan for a setup fee of $300 plus a monthly fee of $30. The minimum investment for the premium service is $25,000. This review and our rating focus on the standard offering, but we will cover some of the attributes of the premium product as well.

Important

Aside from this Charles Schwab Intelligent Portfolios robo-advisor review, we've also reviewed Charles Schwab's traditional brokerage services.

New and Notable Updates

  • In August, 2020, Schwab launched Schwab Plan, a digital financial plan designed to help investors establish and stay on track toward their personalized retirement goals.

Key Takeaways

  • The standard Charles Schwab Intelligent Portfolios offering has no management fees, but your cash allocation is on the high side.
  • You can enroll in the Intelligent Income service when you're ready to start withdrawing from your Intelligent Portfolios accounts.
  • The Premium service is open to clients with a $25,000 balance, and includes access to financial planners. There is a $300 setup fee and you'll pay $30 per month.

Schwab launched another managed portfolio service in January 2020 called Schwab Intelligent Income, which projects, manages, and automates multiple retirement income streams from accounts held with the firm. Technically, this is an add-on to retirement wealth-building accounts held at Schwab, including IRAs, robo-advisory accounts, and taxable investing accounts.

Schwab’s service sets up a portfolio chosen from 53 exchange-traded funds (ETFs) across 20 asset classes, including commodities. Few of the other robo-advisories offer access to a commodity ETF. Part of your portfolio, usually 8% to 10%, remains in cash, which is one of the ways Schwab earns money while charging no management fee. The company’s other sources of revenue are management fees earned on the Schwab ETFs held in the portfolio and the market centers executing ETF trade orders.

The standard account gives you access to investment professionals, although not a dedicated planner. Your portfolio is monitored daily and rebalanced as needed to account for any drift from the ideal asset allocation. Schwab’s offering is solid, although there isn’t the level of goal planning help you would receive at some of the other services, such as Wealthfront—unless you sign up for the premium account.

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. Customization options are very limited.

  • 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.

Important

On November 25, 2019, Charles Schwab announced a buyout of TD Ameritrade’s online brokerage. The transaction itself is expected to close in the second half of 2020, and in the meantime, the two firms will operate autonomously. Schwab expects the merger of its platforms and services to take place within three years of the close of the deal.

Account Setup

3.6

Opening an account takes you first to a text-heavy page that contains a lot of disclaimers. Most other advisory services save the fine print until you’re further into the process and a bit more committed. You’re taken through a short questionnaire that asks about how much you’d like to deposit initially and your attitude toward risk. If you’re already a Schwab customer, you can easily move cash from one of your accounts into the new advisory service. 

You can open standard taxable accounts as well as individual retirement accounts (IRAs). You can also open trust accounts and accounts for minors. Few of the robo-advisories allow clients to open a uniform gift to minors accounts (UGMA), so Schwab has an advantage here for parents or guardians looking to make a financial gift to their children while also ensuring it is prudently invested. You cannot, however, open a college savings 529 plan.

After you complete the questionnaire, you’re shown your potential asset allocation, but not the actual ETFs that will comprise your portfolio. Moreover, the only customization option beyond adjusting your risk measure is the ability to exclude up to 3 ETFs from the suggested portfolio. Schwab has published a white paper that details the ETFs that comprise each asset class, and it's worth reviewing before you commit any funds to see if there are any you'd like to exclude.

Schwab recommends retaking the questionnaire on an annual basis to ensure your portfolio matches your goals, risk tolerance, and investment time horizon.

Goal Setting

4

One issue with a platform asking you to put a lot of trust in the portfolio it composes is that there aren’t a lot of goal-setting tools available besides a limited college expense lookup. However, once you’ve defined your own goal, the what-if analysis capabilities let you stress test the plan by changing your retirement age or monthly savings. You can also look at the potential impact of changes in market returns. The dashboard built into the website and mobile app gives you a quick look at your performance to date. 

There are additional goal-setting capabilities for the premium product, including unlimited access to financial planners. It would be nice to see a more robust set of options for all accounts that goes beyond the basics. The analysis capabilities and tools suggest that the logic is already there to allow interested clients to provide more detail and get a better-targeted portfolio.

Account Services

2.4

Automatic deposits into your IP account are easy to set up. Charles Schwab Intelligent Portfolios has no margin available, and you cannot borrow against your portfolio. If you’d like to trade individual stocks or ETFs, you can open a separate brokerage account.

Cash Management

Schwab clients can also have a cash management account, which offers checking and debit cards. It's a separate account from the managed portfolios, however. The cash allocation within the Intelligent Portfolios themselves ranges from 6% to 22.5%, according to the firm, but that allocation is not available for tasks such as bill paying unless you transfer it to a cash management account. The cash allocation within the managed portfolios generates no interest income.

Portfolio Construction

1.5

Schwab offers 81 different portfolios, built from 53 ETFs across 10 different fund families across 20 asset classes. There are six possible risk profiles, ranging from Conservative to Aggressive Growth.

Schwab's portfolio algorithm uses three different strategies:

  • Global: Schwab's primary approach to portfolio diversification, as global diversification may see lower volatility over time and expanded investment opportunities for growth because it reduces concentration in one geographical region.
  • U.S. Focused: This strategy has less exposure to international economies for those with a preference for U.S.-domiciled investments.
  • Income Focused: This portfolio features investments that pay out a higher percentage of their earnings to investors in the form of interest or dividend payments.

Charles Schwab Intelligent Portfolios are made up of ETFs, the majority of which are managed by Schwab. Other ETF providers include iShares, Van Eck, Vanguard, Nuveen, and Invesco. Schwab does not offer a socially responsible portfolio option or any other customization beyond matching a portfolio to your risk tolerance and the time frame for your stated goals, though you can exclude up to 3 ETFs from your portfolio.

The interesting thing about Intelligent Portfolios is that the asset classes reach beyond stocks and bonds and into real estate investment trusts, high yield corporate bonds, and precious metals. The inclusion of these riskier asset classes actually improves the true market diversification of the Intelligent Portfolios. Access to socially responsible portfolios would bring this score up considerably.

Portfolio Management

4.1

Tax-loss harvesting is available for clients with more than $50,000 in their Intelligent Portfolios account, and they must enroll in the service to enable it. The tax-loss harvesting is done by the algorithm in conjunction with the regular portfolio rebalancing. Basically, the program identifies securities to sell at a loss and replaces them with similar securities that fit the same portfolio requirement. The program is designed to conform to the wash-sale rules. Consult the white paper noted above in the Account Setup section for a list of ETFs that are used in each asset class.

A portfolio rebalance is triggered whenever the asset allocation drifts from its defined allocation. This could happen at any time depending on deposits, withdrawals, and market activity. Accounts are monitored daily for drift.

User Experience

5

Mobile Experience

All of the features found on the desktop are enabled on the mobile device. The layout uses tiles on a mobile phone, and the tablet version appears very similar to the desktop site. The visuals are obvious and polished, making it easy for investors to do a quick check-in with their money and the performance with a minimum of searching.

Desktop Experience

Once you’re past that first text-heavy page, the workflow is smooth, and the steps to follow are logically organized. There are visualizations to help summarize your portfolio and clear, clean menus to move you through any actions you wish to take.                 

Customer Service

5

There is online chat available and you can make an appointment to talk to a financial advisor at any time for a quick one-on-one. Clients of the premium product have additional access to financial advisors. Technical support is available 24/7.

Education & Security

5

As expected from an established player, Schwab has robust resources and security. Intelligent Portfolio customers can take advantage of the wide variety of content available, which includes videos, online articles, podcasts (Choiceology and Financial Decoder), OnInvesting magazine, live webcasts and special events, market updates, and the Investing Insights blog. Users can log into mobile apps with a fingerprint or face ID, and the website uses high security.

Commissions & Fees

5

Fees are, of course, one area where Charles Schwab Intelligent Portfolios shines.

  • Monthly cost to manage a $5,000 portfolio: $0 (Premium not available)
  • Monthly cost to manage a $25,000 portfolio: $0 (Premium $30/month plus $300 setup)
  • Monthly cost to manage a $100,000 portfolio: $0 (Premium $30/month plus $300 setup)

Obviously, Schwab is able to eliminate fees because there will be some in the proprietary ETFs offered, and the cash allocation is quite high. However, like all ETF fees, these are relatively minor and Schwab's ETFs hold up well to the rest of the industry. Schwab also earns interest on the cash held in customer accounts and does not share that revenue. Some will argue that this is a less transparent way of charging fees, but it is definitely a clear differentiator for Schwab, regardless.

Is Schwab Intelligent Portfolios a Good Fit for You?

If you’re extremely cost-conscious and opposed to paying management fees, the free all-digital advisory service offered using the standard plan is a solid offering. 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. Once you're ready to generate income from your investments, you can add on the Intelligent Income service and pay yourself. 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. That said, if you want a fully customizable portfolio with the option to add your chosen stocks, then you will probably need to look outside the robo-advisories and be prepared to pony up for more fees.

Compare Intelligent Portfolios

For existing Schwab clients and those opposed to management fees, Intelligent Portfolios is a great option for many types of investors. See how it compares against other robo-advisors we reviewed.

Investopedia Robo-Advisor Rating Methodology

Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of robo-advisors. Our 2020 reviews are the result of in-depth evaluations of over 20 robo-advisor platforms, including the user experience, goal-setting capabilities, portfolio construction, costs and fees, security, mobile experience, and customer service. You can read our full robo-advisor rating methodology for a much more in-depth explanation than the summary below.

Overall Star Rating Explained

With the individual investor in mind, we took a critical look at the services and technology provided by robo-advisors. We organized our methodology into nine categories, scoring each advisor across multiple variables to rate performance in every applicable category. The score for the overall award is a weighted average of the categories.

EVALUATION CATEGORIES
Review Category Weighting Variables
Account Setup   5% 6
Goal Setting 15% 4
Account Services 10% 8
Portfolio Construction 15% 7
Portfolio Management 20% 4
User Experience 15% 6
Customer Service   5% 5
Education & Security   5% 6
Fees 10% 5

The Review Process

To evaluate these platforms, we sent questionnaires with over 100 queries to the participating robo-advisories. Most of the companies we reviewed gave us socially-distanced video demonstrations of their platforms and services during August 2020.

From the questionnaires, the hands-on testing of the platforms, and the platform demonstrations, we scored each category and then combined the category scores into an overall rating for each robo-advisor. Each category covers the critical elements users need to thoroughly evaluate a robo-advisor.

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