May 29, 2018

Charles Schwab Intelligent Portfolio Review

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Charles Schwab Intelligent Portfolios offers similar robo-advisor services to its competitors but without the annual fee. How is this possible? Read this review to see if it's too good to be true.

Overall Score

4.3

Annual Fee

5.0

Minimum Deposit

3.0

Customer Service

5.0
5-point scale (the higher, the better)

Pros and Cons

  • No account fees
  • More diversified asset allocation
  • Cannot adjust assigned portfolio
  • Higher minimum deposit
  • Large cash allocation
  • Tax loss harvesting only to high balance accounts

Bottom Line

Robo-advisor offering more diversified portfolios with completely free management

About Intelligent Portfolios

Charles Schwab is one of the oldest names in the investment industry. Originally founded in 1975, Charles Schwab is one of the larger investment brokers today. Fast forward to 2015, and the broker giant decided to enter the world of automated investing.

The Charles Schwab Intelligent Portfolios program, as their robo-advisor is called, helps you automatically invest your money based on your risk factors. You start off just as you would with any other robo-advisor, by answering a series of 12 questions. The questions pertain to your income, assets, and financial goals. From there, the Intelligent Portfolios program assembles a portfolio that will best meet your needs.

If you decide to move forward, you register and fund your account. Current Charles Schwab customers may have a more streamlined approach. You will have one login, but will manage your brokerage and robo-advisor accounts on different websites.

How Does It Work?

Unlike their brokerage accounts, a majority of your advice will come from the "robo-advisor." In other words, it's not a human. Everything is automatically handled for you based on your input during the initial questionnaire.

You can open a variety of accounts, including taxable investment accounts for both individuals and joint accounts. You can also open retirement accounts, including traditional, Roth, and rollover IRAs. They also offer opportunities for IRA programs for the self-employed, including SEP and SIMPLE IRAs.

Charles Schwab's robo-advisor does their investing a little differently than your traditional robo-advisor. First, they tend to invest your money across as many as 20 ETFs, whereas the traditional robo-advisor sticks to around a dozen of them. Where Charles Schwab really stands out, though, is the other investments Schwab may recommend for your portfolio. They tend to venture outside of the typical ETF and include asset classes that include real estate, precious metals, and bank loans. Overall, Schwab offers 53 different asset classes, of which they may choose up to 20 for your portfolio.

Where Charles Schwab makes money is in the expense ratios of the ETFs you invest in as well as the interest earned on the cash in your account.

What Are the Fees?

The fees are yet another area that Charles Schwab Intelligent Portfolios tends to shine. They do not charge an annual fee for their services. Comparing this to the average robo-advisor, you could save as much as 0.25% of your investments per year by not paying a fee.

Be careful, though. Just because you don't pay an annual fee doesn't mean you won't pay any fees. You still have the expense ratios of ETFs and commissions of any other investments traded in your portfolio.

Is Charles Schwab Intelligent Portfolio Worth It? Not paying an annual management fee makes Charles Schwab Intelligent Portfolios one of the top robo-advisors in the industry. If you plan to invest for the long-term, you stand to save significant money. Fees aren't everything though; another standout factor Schwab offers is the diversified portfolio that goes beyond traditional ETFs. In the right market, this can put you ahead of the traditional investor with less diversification.

The Platform and App

Charles Schwab does things a little differently. They separate their robo-advisor and traditional brokerage websites. This doesn't mean you can't access all accounts on one dashboard. But it does mean that if you want to do anything with your Intelligent Portfolios, you'll have to head over to the Intelligent Portfolios website; it's not a link on the Schwab brokerage website.

What this means for you is no confusion. When you deal with the Intelligent Portfolio, that's your only focus; there isn't miscellaneous account information distracting you from your task at hand.

Charles Schwab continues the brand separation with their mobile app as well. Available on both iOS and Android, the app is user-friendly and strictly for the robo-advisor segment of Charles Schwab. Where the app stands out from its competitors' apps is the inclusion of every feature you see on their web platform. Whether you want to change your goals, oversee your portfolio or do some research, you can do it all right in the app.

Is Charles Schwab Intelligent Portfolios Safe? Just as Charles Schwab brokerage accounts are protected by SIPC, so are the robo-advisor accounts. This helps protect you should Charles Schwab go under. It doesn't cover bad investment choices or any type of loss that has nothing to do with the broker closing. Intelligent Portfolios is also covered by the FDIC, which covers the cash portion of any of your accounts up to $250,000.

Reasons We Like Charles Schwab Intelligent Portfolios

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  • You won't pay an annual fee. We stated this already, but it's the top reason we like Intelligent Portfolios. Managing your assets for no annual fee is a rare occurrence in the brokerage industry.

  • You can't change how your assets are allocated unless you retake the initial quiz. Investing can be very emotional. If you happen to look at your portfolio and notice that it's taken a nosedive, your initial reaction might be to bail. The point of robo-advisors is to let the software do the work and you sit back and watch. But with most robo-advisors, you can go in and change your risk levels and have the allocation changed quickly. Intelligent Portfolios doesn't allow that. Instead, you have to go back through the initial questionnaire and the answers have to be completely different in order for the program to re-allocate your assets.

  • Charles Schwab provides a large selection of ETFs. Charles Schwab has more than 53 ETFs to choose from. In fact, they start with almost 1,300, but narrow it down to 53 for the Intelligent Portfolios purpose. This is much larger than many other robo-advisors, giving you more opportunities for investment.

  • You have access to Schwab's robust in-house research. Charles Schwab is a standout competitor when it comes to the research they provide. The in-house research provides insights that would likely take hours of your time to find. You have it all at your fingertips with the click of a button. The research also includes quarterly performance reports, which is good for the serious investor who wants to be "in the know."

  • You can easily track your goals with "Goal Tracker." Schwab's Goal Tracker alerts you if you fall off track to reaching your goals. It also tells you the steps you can take to get back on track. The Goal Tracker is good for those trying to reach certain savings goals as well as those wanting to withdraw funds from their retirement account but who want to make sure they have enough funds to last them throughout their lifetime.

  • You have access to 24/7 customer care. Even though you are signing up for a robo-advisor, you do have access to human advisors 24/7. You can call or chat online and ask any questions you have related to your accounts.

  • Your portfolio is automatically rebalanced. You don't have to worry about your portfolio getting off track. If something unexpected happens in the market, you can rest assured that your account is continually monitored and rebalanced as needed to keep you on track to meeting your goals.

  • You can exclude up to three ETFs from your recommended portfolio. The typical robo-advisor does not allow you any choices when it comes to excluding certain ETFs. Charles Schwab lets you exclude up to three ETFS, though. This can be beneficial if you have a brokerage account with them and already invest in those ETFs. If you are trying to diversify, you may want to exclude them.

  • Your portfolio could be more diversified than others. Charles Schwab offers ETFs over a wide variety of asset classes, which can decrease your risk over a portfolio that is invested heavily in one asset class.

Reasons You May Want to Look Elsewhere

  • There is a lot of cash drag. Charles Schwab believes that cash should be a part of your portfolio in order to diversify. They believe it creates stability. They may hold between 6% to 29% of your balance in cash, which can leave a lot of cash drag. They tend to have higher cash balances on accounts where investors indicate they have low tolerance for risk. The cash is swept daily into an interest-bearing account at Charles Schwab Bank. You may earn a little bit of interest on your money.

  • You need $5,000 to invest with Charles Schwab Intelligent Portfolios. This can be a steep number for beginning investors. Although it's a nice trade-off to not have to pay advisory fees, it's still a big starting investment for some.

  • You need an account balance of at least $50,000 in order to get tax loss harvesting. Schwab Intelligent Portfolios doesn't offer automatic tax loss harvesting to investors with less than $50,000 in assets. This service could save you significant money on your tax liability and increase your capital gains. Some robo-advisors automatically offer this service no matter your balance.

How It Compares

Schwab vs Betterment:
Both Schwab and Betterment offer similar features. Betterment doesn't have a minimum required investment, so that helps beginning investors. Schwab has much better research options, which is good for the involved investor.

 

Charles Schwab Intelligent Portfolio

Betterment

 

Benefits and Features

Annual Fee
None
0.25% for accounts under $100,000; 0.40% for accounts $100,000+
Minimum Deposit
$5,000
$0
Phone Support
24/7
Yes
Live Chat Support
24/7
No
Email Support
Yes
Yes
Human Advisors
No
Yes
Assets Under Management
$27 Billion
$10 Billion
Tax Loss HarvestingAvailable for accounts $50,000 and over
Yes
Goal Tracker
Yes
Yes
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes
Android App
Yes
Yes
Fractional Shares
No
Yes
Taxable Accounts
Yes
Yes
401k Plans
No
Yes
IRA Accounts
Yes
Yes
Roth IRA Accounts
Yes
Yes
SEP IRA Accounts
Yes
Yes
Trust Accounts
Yes
Yes
529 Plans
No
No

Charles Schwab Intelligent Portfolio: Pricing information from published website as of 06/14/2018

Betterment: Pricing information from published website as of 04/04/2018

Schwab vs Vanguard Personal Advisor Services:
Schwab and Vanguard both offer their own ETFs, which can help minimize your expense ratio. But Vanguard requires a minimum $50,000 investment whereas Schwab requires $5,000. Vanguard has the leg up on the competition, though, as they offer regular consultations with a live advisor versus relying heavily on the software's algorithm.

 

Charles Schwab Intelligent Portfolio

Vanguard Personal Advisor

 

Benefits and Features

Annual Fee
None
0.3%
Minimum Deposit
$5,000
$50,000
Phone Support
24/7
Yes
Live Chat Support
24/7
No
Email Support
Yes
Yes
Human Advisors
No
Yes
Assets Under Management
$27 Billion
$100+ Billion
Tax Loss HarvestingAvailable for accounts $50,000 and over
client-by-client basis
Goal Tracker
Yes
Yes
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes
Android App
Yes
Yes
Fractional Shares
No
No
Taxable Accounts
Yes
Yes
401k Plans
No
No
IRA Accounts
Yes
Yes
Roth IRA Accounts
Yes
Yes
SEP IRA Accounts
Yes
Yes
Trust Accounts
Yes
Yes
529 Plans
No
Yes

Charles Schwab Intelligent Portfolio: Pricing information from published website as of 06/14/2018

Vanguard Personal Advisor: Pricing information from published website as of 04/04/2018

Schwab vs Wealthfront:
You'll pay an advisor fee of 0.25% with Wealthfront, but you can save/invest for college as they offer 529 savings plans. Wealthfront requires just $500 to start an account and they perform automatic tax loss harvesting to keep your tax liability to a minimum.

 

Charles Schwab Intelligent Portfolio

Wealthfront

 

Benefits and Features

Annual Fee
None
0.25%
Minimum Deposit
$5,000
$500
Phone Support
24/7
Yes
Live Chat Support
24/7
No
Email Support
Yes
Yes
Human Advisors
No
No
Assets Under Management
$27 Billion
$10+ Billion
Tax Loss HarvestingAvailable for accounts $50,000 and over
Yes
Goal Tracker
Yes
Yes
Automatic Deposits
Yes
Yes
Online Platform
Yes
Yes
iPhone App
Yes
Yes
Android App
Yes
Yes
Fractional Shares
No
No
Taxable Accounts
Yes
Yes
401k Plans
No
No
IRA Accounts
Yes
Yes
Roth IRA Accounts
Yes
Yes
SEP IRA Accounts
Yes
Yes
Trust Accounts
Yes
Yes
529 Plans
No
Yes

Charles Schwab Intelligent Portfolio: Pricing information from published website as of 06/14/2018

Wealthfront: Pricing information from published website as of 04/04/2018

Bottom Line

Charles Schwab Intelligent Portfolios packs a big punch when it comes to the robo-advisor industry. With no annual fee and plenty of opportunity for diversification, it's a great opportunity for investors. But it's probably not the first choice for new investors with its hefty minimum investment and lack of tax loss harvesting unless you invest $50,000.

Weighting your pros and cons for each robo-advisor will help you decide which one is right for you. Even though there are no annual fees, you may find that a robo-advisor with an annual fee may provide the features you require.

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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