A low-cost robo-advisor with two tiers of service available, Schwab Intelligent Portfolios has advantages for a wide range of investors. While the minimum investment is higher than some of the competition, you’ll enjoy broad access to a range of account types if you opt for Schwab. Discover how Schwab Intelligent Portfolios operate, how much you’ll pay (or potentially, won’t pay), and the extra perks that make this robo-advisor stand out.
How It Works
Schwab Intelligent Portfolios employs a similar technique as other robo-advisors when developing your individual investment strategy. Start by choosing a goal for your account, then fill out a brief questionnaire. Expect to estimate your initial investment amount and how much you plan to save each month.
From there, Schwab Intelligent Portfolios builds your custom allocation using a variety of low-cost ETFs. The platform continually monitors and rebalances your portfolio to keep your goals on track. You can log onto your dashboard and check your progress whenever you’d like. You’ll also get notifications when you’re falling short of your goal, whether it’s from pausing contributions or market conditions changing.
When opening your Schwab Intelligent Portfolio, you’ll have a large pick of both brokerage accounts and IRAs to choose from. Here’s a brief overview of account options, including both taxable brokerage accounts and tax-advantaged IRAs.
You can get quite in-depth with your financial planning through the account options from Schwab. The number of specific account types available is actually quite rare for a robo-advisor. Choose from one or more of the following for your investments:
- Individual: single ownership of your portfolio
- Joint tenant with rights of survivorship: owned by two people with equal rights to the assets in the account
- Tenants in common: no survivorship rights included, giving each individual a say in how their assets are distributed after death
- Community property: owned by both spouses equally
- Custodial: account controlled on behalf of a minor until they reach 18 or 21 years old
These accounts can bolster your retirement savings while simultaneously providing you with distinct tax advantages.
- Traditional: receive a tax deduction in the year a contribution is made
- Roth: pay taxes on the contribution the year it’s made, rather than when you start taking withdrawals
- SEP: comes with a higher contribution limit for self-employed individuals
- SIMPLE: a similar account for small business owners with 100 employees or less
- Inherited: used for an IRA you receive as an inheritance after someone dies
Schwab also offers a revocable living trust for Intelligent Portfolio investors.
A rarity among robo-advisors, Schwab Intelligent Portfolios come with no commissions. You’ll just pay for their low-cost ETFs. Average expense ratios vary depending on your portfolio risk, with aggressive portfolios average 0.20% and conservative portfolios as low as 0.06%.
Moderate risk portfolios average an expense ratio of 0.15%. The more expensive portfolios are higher than many other robo-advisors, but you still may fare better considering that you won’t have any management fees to worry about.
Schwab Intelligent Portfolios also allow you to opt into a Premium level of service. It combines the robo-advisor platform with unlimited support from a team of certified financial planners (CFPs).
This add-on comes with a monthly subscription fee of $30. To get started, you’ll need to invest at least $25,000 and also pay a $300 one-time planning fee. When you want to chat with a CFP, simply schedule a meeting at your convenience either over the phone or through video conference. Schwab suggests that you meet at least once a year to discuss any changes in your investment strategy, but you can schedule a meeting as frequently as you’d like at no additional cost.
The Premium plan also comes with more interactive online planning tools. Along with those, your CFP helps you come up with a customized road map to help you reach your goals. You can then open multiple accounts within a single plan to help organize your goal planning. To qualify, each account must have at least $5,000 invested.
As a Schwab Intelligent Portfolio investor, you’ll receive 24/7 support from customer service professionals who are based in the U.S. If you ever have a technical question about your account, you can call or email at any time to resolve the problem.
Despite the Intelligent Portfolios being part of a robo-advisor platform, you still get the expertise of Schwab’s team of professionals. They have selected 53 ETFs from 20 asset classes to use as part of the Intelligent Portfolio offerings.
Another unique feature is Schwab’s Cash Sweep capabilities. All accounts include a cash allocation in your Intelligent Portfolio. If you choose, these can be swept into an FDIC-insured account at Schwab Bank to earn interest. You’ll need to check the current interest rates based on your deposit amount to see how much you could earn. Whatever the rate may be, it’s better than sitting in an account not earning anything at all.
Automatic rebalancing is an advantage available from most robo-advisors, but Schwab stands out in that you’ll automatically see an exclamation point on your account dashboard if your account is ever out of alignment with your goals. It’s a strong blend of automated balancing based on the market and having the ability to see all the factors contributing to (or inhibiting) your progress.
Another perk offered by Schwab Intelligent Portfolios is that you can enroll in tax-loss harvesting. The catch, though, is that you must have a minimum of $50,000 in assets to qualify for this service. If you meet that minimum, tax-loss harvesting comes with the potential to help you offset taxes on your investment gains.
Schwab also offers one of the widest selections of account types we’ve seen available from a robo-advisor. You can create a pretty sophisticated investment and estate planning strategy based on your goal types and tax preferences. While you’ll need to qualify for the Premium plan to get a certified financial planner to help you craft the best combination of accounts, you can save a lot of money doing it on your own at the non-Premium level since you don’t pay any fees.
Finally, Schwab offers a referral bonus to your friends or family if you refer them and they open an account. Sign up to get a referral link and if someone uses it to open a new Schwab account, they’ll receive a $100 deposit into their account within a month. While you yourself don’t receive any type of bonus, it’s a nice gesture to make for others. And if you’re considering opening your own new Schwab Intelligent Portfolio, it’s smart to ask around to see if you can get a referral bonus from a friend.
Despite having an attractive 0% management fee, Schwab does require a high minimum deposit to open an Intelligent Portfolio. You’ll need a minimum of $5,000 to get started, so this robo-advisor isn’t necessarily designed for the beginner investor unless you already have a chunk of change saved up to invest.
Schwab Intelligent Portfolios also requires investors to have a certain cash allocation in an FDIC-insured account for all portfolios. This has the potential to lower your overall yield, particularly if you currently prefer an aggressive investment strategy.
For Premium clients, another disadvantage is that you lose access to the plan if your collective account balances drop below $25,000. Even if the market conditions go south and your investments lose value, you won’t qualify for the Premium benefits if you don’t meet this threshold.
Schwab also charges a high one-time fee of $300 to opt into the Premium plan. The entire model is unique by charging a flat subscription fee rather than a percentage of your assets under management. You really need to assess your investment balance to make sure the benefits of the Premium plan make financial sense compared to your other options.
Who It’s Best For
Schwab Intelligent Portfolios is ideal for cost-conscious investors who meet the $5,000 minimum investment threshold. If you fall into this category, you can significantly benefit from the savings of completely avoiding a management fee. There’s also a lot to say for investing with an established firm like Charles Schwab. You get all of the perks associated with a robo-advisor, plus all of the expertise and infrastructure of a major brokerage.
Investors with a large amount to invest who want personalized CFP advice to help guide their strategy should also consider schwab Intelligent Portfolio. While you’ll have to pay that $30 monthly fee, if you invest enough you could end up paying less compared to a robo-advisor and certainly less than if you used a traditional brokerage firm.
The Bottom Line
Schwab Intelligent Portfolios comes with ultra-low fees paired with a high minimum balance. If you qualify for this sweet spot and don’t mind a portion of your investments being parked in cash, then this is definitely a robo-advisor to keep on your shortlist.