Charles Schwab Intelligent Portfolios Review

Schwab Intelligent Portfolios offers a flexible, low-cost robo-advisor option for investors with at least $5,000 to invest. Although the minimum is higher than those of some other robo-advisors, no advisory fees or commissions plus a user-friendly interface make Schwab Intelligent Portfolios an attractive choice.

Investors with an initial investment of $25,000 or more can access the next-level option, Schwab Intelligent Portfolios Premium. This offering comes with one-on-one advice at a relatively low price, although there is a $300 setup fee and $30 monthly advisory fee for unlimited advice from a Certified Financial Planner. Both the standard and premium programs require the investor to hold some amount of cash, generally ranging 6% to 30% of the account's value depending on investment strategy. This a relatively high cash balance that can possibly affect the overall growth potential of your investment portfolio.

The robo-advisor offers several types of accounts to best meet your financial goals. This review and our rating focus on the standard offering, but some features of the premium product are also discussed.

Company Overview

Account Setup

Opening a Schwab Intelligent Portfolios account is quick and easy. The website walks you through 12 questions regarding your investment goals, risk tolerance, and timeline to help tailor your investments. Intelligent Portfolios builds a targeted and customized portfolio for each client using over 80 portfolio variations. At the end of the questionnaire, you see the suggested asset allocation and ETF breakdown based on your initial responses. However, you must open and fund an account to see the actual ETFs that will make up those allocations. The minimum investment required is $5,000.

Schwab Intelligent Portfolios has an interactive tool that allows potential clients to run scenarios based on an investment strategy and risk profile. This can give you an idea of what your investing outcomes may look like. You can see a potential asset allocation and portfolio performance based on historical data.

During the account setup process, you are also prompted to accept electronic delivery of records and disclosures. It is important to maintain an up-to-date email address to continue receiving correspondence in this way, or the account will be terminated. When setting up an account, potential clients can call or chat online with a representative 24/7.

Goal Planning

Schwab Intelligent Portfolios allows clients to customize investing goals in areas such as:

• Retirement
• College
• Buying a home
• Vacations
• Building long-term wealth
• Creating a sustainable income stream

Schwab regularly reviews the Intelligent Portfolios and monitors the investments chosen. This ensures that they continue to be the best investment vehicles for your financial goals. Also, you can run different scenarios using Goal Tracker to see what impact changes in the market, contribution rates, and other underlying assumptions may mean for the achievement of your goals.

The basic Schwab Intelligent Portfolios offering assumes that you are comfortable stress testing your own plans and making your own adjustments. Should more guidance and recommendations be needed, customers with $25,000 or more to invest can open a Premium account and access a Certified Financial Planner for a one-time of $300 and paying $30 per month after that.

Account Services

Schwab Intelligent Portfolios offers a solid investment planning service that provides a fair amount of flexibility in choosing appropriate investment goals. To achieve these goals, customers can select from an assortment of account types, including:

• Traditional Individual Retirement Account (IRA)
• Roth IRA
• Simplified Employee Pension plan (SEP-IRA)
• SIMPLE IRA
• Revocable Living Trust
• Taxable brokerage accounts, i.e., individual, joint with rights of survivorship, tenants in common, community property, custodial

Schwab Intelligent Portfolios does not currently offer traditional banking services, such as checking, credit, or debit cards. However, it is easy to set up an additional Schwab account to gain access to these features.

Cash Management

You receive interest on cash in your account through a sweep into an FDIC-insured Schwab bank account. Cash held earns an Annual Percentage Yield (APY) of 3.84% as of Feb. 1, 2023. It is also easy to transfer money into your account from an external account. Deposits can be made as individual transactions or you can set up recurring, automatic deposits. 

The Schwab Intelligent Portfolios Sweep Program will generally allocate 6% to 30% to cash, depending on your investment strategy. This is a relatively high percentage compared to the competition.  

Taking cash out of your Schwab Intelligent Portfolios account is simple. As long as the amount you wish to withdraw is less than the current amount of cash in your portfolio, you can transfer it to another Schwab account immediately or to a linked external account overnight.

If, however, you need to withdraw more cash than is currently in your account, ETFs are automatically sold to generate the requested amount of cash. The processing and settlement for such transactions takes from two business days, not including the day of sale. This type of account currently does not support borrowing on the margin.

Portfolio Construction

Schwab Intelligent Portfolios customizes your portfolio asset allocations based on the information that you provide during the account setup. This information concerns your investment goals, risk tolerance, and time horizon. The actual ETF selection isn’t shared until you have funded the account. But it will be comprised of ETFs from up to 20 asset classes, including:

• Stocks
• Fixed income
• Real estate
• Commodities
• Cash

While you cannot choose individual securities, the ETFs that Schwab Intelligent Portfolios invests in offer a comprehensive array of assets, including:

• U.S. Large and Small Company Stocks
• International Developed Large and Small Company Stocks
• International Emerging Markets Stocks
• U.S. and International Exchange-Traded REITs
• U.S. and 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 and Emerging Markets Bonds
• Preferred Securities
• Bank Loans
• Investment Grade Municipal Bonds
• Commodities
• Gold and Other Precious Metals
• FDIC-insured Cash

At this time, there are no socially responsible, environmental, or governance options available. However, a client can exclude up to three ETFs that they don't want in their portfolio. It is important to note that Schwab’s algorithm will suggest a fair number of Schwab ETFs as long as they meet specific criteria (which include being fee competitive). 

Portfolio Management

Schwab Intelligent Portfolios performs well when it comes to portfolio management. The robo-advisor uses both technology and human supervision to automatically monitor your portfolio on a daily basis and rebalance as needed. This means that the allocation percentages of your investments will remain in line with your goals.

When it comes to tax-loss harvesting, Schwab is behind some of its competitors. Tax-loss harvesting is only available to clients with an account balance of at least $50,000, and you must enroll to receive this service.

Schwab Intelligent Income is an interesting feature for investors who are transitioning a retirement portfolio. It estimates how much money you can afford to take out each month, produces tax-smart withdrawals, and deposits the funds in the account you select. You can set up recurring withdrawals for a steady income stream. Withdrawal amounts, frequency, and the account designated for deposits can be updated at any time.

User Experience

Desktop Experience

Intelligent Portfolios is set up entirely online. Clients must accept and sign for electronic delivery of records and disclosures. An up-to-date email address must be maintained to receive ongoing correspondence. Failure to do so may cause your account to be terminated.

Investors can view their account performance in a tab-based environment. Those with more than one Schwab account can view an accounts summary on the main dashboard and then select any account to view its details.  

The website is very user friendly.  While account navigation is not customizable, it is set up to provide easy access to the information that investors need, including current account balance, history, transactions, goals, and more.

Mobile Experience

Schwab also has a mobile app that makes keeping up with your Intelligent Portfolios account easy, even on the go. Account access and features are basically the same, whether the investor uses a desktop computer or mobile device. The only notable difference is the area of profile updates.               

Customer Service

While you can do most everything in your online account on your own, Schwab offers a number of convenient ways to connect with a representative if you have any questions:

• 24/7 phone conversations with a Schwab investment professional
• 24/7 online chats for prospective and current clients on the website
• In-person consultations at any Charles Schwab local branch office across the country

Security

Schwab offers several layers of security so you can rest easy, knowing that your account and personal information is being protected. Here are some of the key security protocols in place:

• Encryption
• Risk-based security technology
• Automated alerts
• Identity verification
• Rigorous monitoring

There are also several security measures that Schwab recommends to further protect client accounts and personal information, including:

• Setting up security alerts
• Enrolling in advanced authentication
• Signing up for voice ID

Education

The Schwab Intelligent Portfolios website offers informative resources on its Investing Insights webpage. There is a wide selection of articles, videos, whitepapers, and webcasts with information on investing and how the Intelligent Portfolios robo-advisor works. Schwab Intelligent Portfolios customers can also access the considerable trove of educational materials compiled by Schwab's online brokerage. This includes podcasts, research, and much more.

Fees

One of the best features of Schwab Intelligent Portfolios compared to other robo-advisors is the absence of advisory and commission fees. You only pay the typical fees associated with ETFs, which range from 0.03% to 0.18%. However, bear in mind that the standard robo-advisor service does not come with ongoing advice from a financial advisor.  

If you’d like to upgrade your account to receive unlimited advice from a Certified Financial Planner, you can enroll in the Schwab Intelligent Portfolios Premium account, provided you meet the criteria. 

Final Verdict

If you seek an automated investing service, there's a lot to be said for Charles Schwab Intelligent Portfolios. It's an attractively priced, solid robo-advisor. While investments are limited to ETFs, the extensive list of Schwab and third-party funds reflects a wide range of assets. In addition, clients pay only the regular ETF-related management expense ratios. There's no annual management fee and no cost for portfolio allocation and rebalancing.

The alternative Intelligent Portfolios Premium account is a nice option for investors with a larger account balance and a desire for investment advice for a low monthly fee.

Frequently Asked Questions

Is Schwab Intelligent Portfolios Worth It?

It could be. For example, if you're new to investing, don't have a large amount of funds, and lack knowledge about the markets, then a robo-advisor might be a smart way to get started. If you're a more experienced investor, but don't have the time to manage an investment account or handle tasks such as rebalancing and tax-loss harvesting, Schwab Intelligent Portfolios may be the right solution at the right price.

What Is the Average Return for Schwab Intelligent Portfolios?

The returns depend on the particular ETFs selected based on an investor's investment strategy focus and risk profile. For example, as of 12/31/22, a conservative portfolio with a global investment strategy had a one-year return of -9.43%, a three-year return of 0.94%, and a five-year return of 1.91%. As of Feb. 1, 2023, the interest rate of cash balances in the Sweep Program is 3.84%.

How Does Schwab Make Money on Intelligent Portfolios?

Schwab earns interest on the cash balances that investors are required to hold in their accounts. That doesn't mean that investors lose money as a result, though. Investors are also paid interest on their balances. Schwab also earns fees on ETFs and order flow.

When Was Schwab Intelligent Portfolios Launched?

The Schwab Intelligent Portfolios robo-advisor service was launched in 2015.

Methodology

Our mission at Investopedia is to provide investors with reviews and ratings of robo-advisors that are comprehensive and unbiased. Our team of researchers and expert writers, led by Michael Sacchitello, spent months evaluating all aspects of a robo-advisor’s platform, including the account setup process, goal planning tools, account service options, portfolio construction offerings, portfolio management, mobile and desktop user experience, educational content, fees, and security. As part of this evaluation, we extracted critical data points that were weighted by our quantitative model to produce a powerful star-scoring system.

With the individual investor in mind, we’ve designed a comprehensive ranking methodology to find the best overall robo-advisors and the best robo-advisors across nine key categories. Each robo-advisor is then scored across multiple variables to rate performance in every applicable category. The score for the overall award is a weighted average of the categories.