Charles Schwab Corp. (SCHW) is simplifying and modernizing the way in which investors will get paid from their portfolios, a move that could take a bite out of the market share of high-cost registered investment advisors (RIAs). The financial services firm announced on Wednesday that it will be launching Schwab Intelligent Income, a tool that will not only automate a number of tasks related to how investors access their investment portfolios but will also provide critical investment advice.

Key Takeaways

  • Charles Schwab to launch Schwab Intelligent Income in January 2020.
  • The tool will simplify how investors draw income from their portfolios.
  • Traditional RIAs will find it increasingly difficult to stay competitive.

What It Means for Investors

Schwab Intelligent Income, expected to launch in January 2020, aims at providing clients a way of receiving expert advice and management related to the transition from investing in a portfolio to drawing steady income from it. The goal is to guide investors through the seemingly daunting decisions surrounding that transition, asking them various questions related to their financial situation and then recommending appropriate investment strategies, and all for no additional fee. 

“Most services aimed at creating income for clients come with high costs, lack of flexibility, and long-term commitments,” said Jonathan Craig, Charles Schwab senior executive vice president and head of Investor Services. “Schwab Intelligent Income solves the complexity of doing it on your own and removes the friction inherent in other income services by providing a flexible, low cost, and smart way to generate a predictable paycheck from your portfolio.”

Prominent features include intelligent tax advice, a real-time digital dashboard allowing investors to easily view their portfolio as well as transactions related to it, guidance on generating predictable monthly withdrawals, automatic income deposit, flexibility in starting, stopping or adjusting withdrawal amounts, and ongoing account monitoring and alerts. The actual management of portfolios will be done by Schwab’s automated investing service Schwab Intelligent Portfolios, which requires a $5,000 minimum investment.

Looking Ahead

While digital advisor services, or robo-advisors, are not exactly new nowadays, they are becoming increasingly prominent. Traditional RIAs are likely going to find it struggling to stay cost-competitive as more and more investors become comfortable with increasingly intelligent and sophisticated robots managing their investments and doling out advice.