Wealthfront and Charles Schwab Intelligent Portfolios are both strong offerings in the robo-advisory space. Wealthfront has a longer track record as a robo-advisory, but Charles Schwab has an even longer history in helping individual investors. We’ll look at the key differences between Wealthfront and Charles Schwab Intelligent Portfolios to narrow down which is the better fit for your money.
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 Minimum: $500
- Fees: 0.25% for most accounts, no trading commission or fees for withdrawals, minimums, or transfers. 0.42%–0.46% for 529 plans. Underlying portfolios of ETFs average 0.07%–0.16% management fee
- Great for those looking to connect all their financial accounts to see the bigger picture
- Designed for people who would like to set and track their goals
- Access to a portfolio line of credit for those interested in a loan
- If you are someone who has an account of $100,000 or more you get access to additional securities
- Minimum Account: $5,000
- Fees: $0, underlying ETFs average 0.08% to 0.15% management fees
- Those who are trying to avoid excessive costs will appreciate no management fees
- Newer investors will value their easy-to-use and intuitive website and app
- Great platform for beginners with Schwab's educational offerings and vast library of investing resources
- Investors looking for a large breadth of assets will enjoy more uncommon assets for robo-advisors like real estate investment trusts, high yield corporate bonds, and precious metals
Wealthfront’s goal planning is the best of all the services we reviewed this year, with very specific ways to forecast your financial needs. If one of your goals is to buy a house, Wealthfront uses third-party sources such as Redfin and Zillow to estimate what that will cost. College planning gets extremely granular, with forecasts of tuition and costs at thousands of U.S. universities from the Department of Education. Your dashboard shows all of your assets and liabilities, giving you a quick visual check-in on the likelihood of attaining your goals. You can even figure out how long you can take a sabbatical from work and travel, while still making your other goals work.
Schwab's offering has few goal-setting tools available besides a limited college expense lookup. Each account has a single pot of money, but you can have up to 10 accounts dedicated to different goals. 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 offers a quick look at your performance to date. There are additional goal-setting capabilities for the premium product, including unlimited access to financial planners. 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.
Wealthfront’s retirement planning takes Social Security projections into account. Once all of your financial accounts are entered, such as IRAs and 401(k)s and any other investments you might have, such as a Coinbase wallet, Wealthfront shows you a picture of your current situation and your progress towards retirement. All of this can be done without talking to a human. Their Path planning tool helps you compare your projected retirement income against your current spending habits so you’ll be able to see whether you can maintain your lifestyle later.
Schwab allows you to stress-test your retirement plan by raising or lowering your retirement age or your monthly savings. Once you're retired, the allocation is focused on fixed income, so you can still be accruing gains while withdrawing funds.
Wealthfront and Charles Schwab Intelligent Portfolios have a few different niche offerings when it comes to account types. Wealthfront allows you to open 529 college savings plan accounts, for example, while Schwab Intelligent Portfolios offer SIMPLE IRAs and custodial accounts.
Wealthfront account types:
- Taxable accounts (individual, joint, and trust)
- Traditional IRA accounts
- Roth IRA accounts
- SEP IRA accounts (for the self-employed and small businesses)
- IRA transfers
- 401(k) rollovers
- 529 college savings plan accounts
Schwab Intelligent Portfolios account types:
- Taxable accounts (individual, joint, and trust)
- Traditional IRA accounts
- Roth IRA accounts
- Rollover IRA
- SEP IRA
- SIMPLE IRA
Features and Accessibility
One of the main feature differences between Wealthfront and Charles Schwab Intelligent Portfolios is that Schwab places a high value on the human touch, while Wealthfront has embraced digital-only in terms of advisors.
- 529 college savings: These accounts are rare among the robo-advisories. Fees are slightly higher because these plans include an administrative fee.
- Wealthfront cash account: Wealthfront offers a high-interest cash account paying 2.32% APY with no fees, unlimited transfers, and FDIC insurance up to $1 million.
- Portfolio line of credit: Accounts with more than $25,000 have access to a line of credit at 4.75% to 6% interest. There’s no credit check or credit score impact, and you can borrow up to 30% of your account.
- PassivePlus investing: Wealthfront’s rules-based investment strategies aim to maximize client investments using tax-loss harvesting. At higher asset levels ($100,000+), the company offers stock-level tax-loss harvesting and risk parity. At $500,000 and up, the strategy includes Smart Beta, which weights the stocks in your portfolio more intelligently.
Charles Schwab Intelligent Portfolios:
- Easy-to-use platform: Schwab's desktop and mobile platforms are attractive and user-friendly.
- Daily monitoring: Schwab monitors user portfolios daily for drift, and rebalances when necessary.
- Moving up: A standard account holder can switch to the premium level once the account minimum has been attained.
- Talk to a pro: Clients have access to professionals who can help with a range of topics including client goals, risk tolerance, and portfolio allocation.
Although Wealthfront is usually the winner when it comes to management fees, Schwab Intelligent Portfolios naturally has the edge here.
Wealthfront has a single plan, which assesses an annual advisory fee of 0.25% with a minimum of $500. Larger accounts at Wealthfront qualify for additional services. Accounts over $100,000 are eligible for a stock-level tax-loss harvesting service, and those over $500,000 can opt into the Smart Beta program, which re-weights the holdings in your portfolio using Wealthfront’s proprietary system.
Schwab Intelligent Portfolios’ aggressive 0.0% management fee will attract younger investors, although the relatively high $5,000 minimum may prove a barrier for some of those same investors. The portfolios created through Schwab Intelligent Portfolios include low-cost ETFs with management fees of 0.08%-0.2%.
Although Schwab Intelligent Portfolios has the edge in fees, it takes ten times the capital to open an account compared to what Wealthfront requires as a minimum deposit.
- Wealthfront: $500
- Charles Schwab: $5,000
At Wealthfront, to determine the portfolio for each goal you’ll invest towards, you’re asked a few questions about your attitude towards risk and when you might need the money. You’re shown the exact portfolio prior to funding your account, but you cannot customize the pre-set portfolio at all. If you have more than $100,000 in your Wealthfront investing account, you can choose a stock portfolio rather than a portfolios of ETFs. You can also put some companies on a restricted list if you’d rather not invest in them.
Charles Schwab Intelligent Portfolios are made up of ETFs, the majority of which are managed by Schwab. Schwab does not offer a socially responsible portfolio option or any other customization beyond matching a portfolio to your risk tolerance and stated goals. 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. Intelligent Portfolios are rebalanced by an algorithm that takes tax implications into account. 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.
Wealthfront has the edge in terms of tax-efficient investing, as all Wealthfront accounts are eligible for tax-loss harvesting. At Schwab, 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.
Both Charles Schwab and Wealthfront utilize heavy-duty 256-bit SSL encryption on their sites, and fingerprint, face recognition, and two-factor authentication are available on mobile devices.
Wealthfront is a member of the Securities Investor Protection Corporation (SIPC) and client accounts are protected up to a maximum of $500,000. The site actually has an article on why SIPC insurance doesn’t protect investors in the way they think it does, but the company still holds the coverage. Their trades are cleared at RBC Correspondent Services, a Canadian company which focuses on wealth management and financial advisors rather than clearing firms that serve broker/dealers with very active traders.
Schwab's accounts are insured by SIPC up to $500,000, with additional insurance provided up to an aggregate limit of $600,000,000.
Charles Schwab Intelligent Portfolios has the edge in terms of customer service over Wealthfront.
Wealthfront does not have an online chat feature on its website or in its mobile apps. There is a customer support phone line if you need help with a forgotten password. Most support questions posed on their Twitter account are answered relatively quickly, though we saw one that took more than a week before there was a response.
Schwab has 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. Most importantly, technical support is available 24/7.
Wealthfront was the highest-scoring robo-advisor we reviewed in 2019, so it is no surprise that it has the edge over Schwab Intelligent Portfolios in the key areas of goal planning, account set-up, and portfolio management. What is surprising is that Schwab’s offering was so competitive and even beat Wealthfront in some areas like fees, education, and customer service. Time will tell whether competitors like Schwab Intelligent Portfolios can surpass established players like Wealthfront or merely encourage them to continue evolving. Right now, however, Wealthfront is the better choice of the two robo-advisors when it comes to automatically managing your money.
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