Schwab Intelligent Portfolios Review: A Trustworthy Name With Lots of Value

Schwab is one of the largest investment brokers in the U.S., with over $7 trillion in assets under management. Known for its low-cost investments and simple-to-use mobile app, Schwab now offers an automated investment service, which makes our list of the best robo advisors.

This broker breaks down investing concepts in an easy-to-understand way, and its Intelligent Portfolios allow users to build a customized portfolio that fits their preferences. With a wide range of investment options and no management fees, Schwab Intelligent Portfolios is a great pick for cost-conscious investors. Just be prepared to meet the minimum investment requirement of $5,000.

Schwab Intelligent Portfolios Overview

What is Schwab Intelligent Portfolios?

Schwab Intelligent Portfolios is an investing service that uses advanced software to build and manage client investments (known as a “robo-advisor”). Schwab allows users to sign up online and start investing for retirement or other financial goals, without the need to meet with a financial advisor. The service uses a mix of exchange traded funds (ETFs) to build an investment strategy based on a user’s preferences.

Schwab also offers access to financial advisors for those who want to upgrade to its premium service. For a one-time setup fee of $300 and a $30 per month recurring payment, Schwab allows users to set up one-on-one meetings with a Certified Financial Planner™ for professional investment advice.

Schwab also offers Schwab Intelligent Income, a retirement income management service that helps those withdrawing from retirement accounts plan their income streams. This service is an add-on to Schwab Intelligent Portfolios, at no additional cost.

How Schwab Intelligent Portfolios Works

Schwab Intelligent Portfolios is a fully-digital robo-advisory service that manages portfolios based on your stated goals, risk tolerance, and other factors such as your age and retirement date. It is designed to walk investors through building a portfolio and investing regularly to hit their financial goals. Users can select a preferred portfolio and invest in a standard brokerage account, a retirement account, or other account types, such as a trust.

Schwab Intelligent Portfolios uses computer algorithms to manage user investment accounts, and is a fully-digital service. These algorithms are advanced computer software that help decide which investments are used in an investment account, as well as how to manage them day-to-day. For those that want access to a human advisor, Schwab also offers Intelligent Portfolios Premium for an additional cost, giving users a full, written financial plan and unlimited access to CFPs® via phone, email, or video call.

Main Features

Schwab Intelligent Portfolios is designed to help users pick a portfolio, invest regularly, and let Schwab do the rest. Accounts are automatically rebalanced based on target asset allocations, and portfolios are adjusted over time to help users hit their financial goals. Here are a few of the best features available with Schwab Intelligent Portfolios:

ETF Selection

Schwab offers more ETFs than most robo-advisory services, with over 50 options available in 20+ asset classes. These ETFs allow Schwab to build a well-diversified portfolio across both U.S. and international sectors, as well as give users access to real estate investing. In addition to stocks and bonds, Schwab offers access to commodities, such as gold and other precious metals, which is not a typical offering for a robo-advisory service. It also offers a wide range of international investment options, allowing clients to diversify their investments globally.

Zero Management Fees

Schwab Intelligent Portfolios offers no-fee management, regardless of your account balance, which can save users a bundle compared to other robo-advisory services. Some of the most competitive robo-advisors charge as much as 0.35% of all assets under management.

For a $10,000 portfolio, a 0.35% fee would cost $35 per year. While this may not sound too high, over the long term, this can significantly impact your total returns. On a $1 million portfolio, a 0.35% fee would be $3,500 per year. The larger your balance, the more attractive Schwab’s no-fee service would be.

Note: Schwab makes money on the cash balance of each portfolio, as well as any Schwab-owned ETFs inside of the portfolio. The cash balance in each portfolio can be lent out (similar to a bank account), which earns Schwab interest. The Schwab ETFs used in customer portfolios come with annual expense ratios.

Portfolio Options

Schwab has three different investor portfolios, with six different risk profiles for both Global and U.S.-based portfolios. This gives investors a total of 18 different options to choose from. Furthermore, investors can choose to opt out of up to three different funds inside a chosen portfolio.

Here are the portfolio options available:

Global. Designed to give exposure to both U.S. and global markets, this portfolio includes international ETFs, including stocks, bonds, and even real estate.

U.S. Focused. This portfolio offers diversification within the U.S. markets, and includes a mix of stock, bonds, real estate, and commodities.

Income Focused. This portfolio is designed to provide steady income, ideal for those nearing retirement, or already retired. This portfolio provides a higher fixed-income (e.g. bonds) and cash savings balances to protect investor assets and reduce volatility during retirement.

The six risk profiles available are:

• Conservative

• Moderately Conservative

• Moderate

• Moderate Growth

• Growth

• Aggressive Growth


Access to CFPs®

For clients who sign up for a premium account, Schwab offers unlimited access to a team of CFPs® who can offer financial planning and advice. Premium clients will get a written financial plan from an advisor, and can schedule phone or video calls with them too. While Schwab Intelligent Portfolios are not assigned a financial planner, clients can request follow-up meetings with the same CFP®.

Note: This service requires a one-time fee of $300 and monthly charge of $30.

Who Schwab Intelligent Portfolios is Best for

Schwab Intelligent Portfolios is best for hands-off investors who prefer a “set-it and forget-it” approach. With its huge selection of ETFs and ability to customize portfolios, Schwab Intelligent Portfolios is great for clients who want to spread their investments across multiple sectors, and are looking for exposure to non-traditional investments like real estate and gold.

That being said, Schwab does keep more of your investment portfolio in cash than other robo-advisors (sometimes 10% or more), partially because it earns money from that cash balance. While this may not be a problem for older investors who are more conservative in their asset allocation, younger investors may want to look for another advisor that doesn’t allocate a high percentage of cash, which ultimately keeps those dollars from being invested.

How to Get Started

To open a Schwab Intelligent Portfolios account, users will sign up for an account online. First, Schwab walks investors through a client questionnaire to identify their financial goals and risk tolerance. After answering the questions, clients are presented with portfolio recommendations.

Users are then asked to select an account type (brokerage, retirement, or other), and make any adjustments needed to the recommended portfolio before proceeding. After this, users will complete enrollment by providing personal information, such as name, address, social security number, and email address.

Once the account is created, users can link their bank account to fund the account. Schwab Intelligent Portfolios requires a $5,000 minimum investment to open the account.

Note: Users can opt out of (up to) three investment funds in a portfolio after the account is set up.

Pros and Cons

While Schwab Intelligent Portfolios offers an amazing selection of investments without a management fee, there are a few things that could be improved. Here’s what we like, and don’t like, about Schwab Intelligent Portfolios:

Schwab Intelligent Portfolios Alternatives

While Schwab Intelligent Portfolios is great for hands-off investors who want a diversified investment portfolio with no extra fees, it may not be the right option for everyone, including those who have less than $5,000 to invest. Here are a few alternatives to consider:

Betterment

Betterment is a robo-advisory service that offers full account management, tax-loss harvesting, and a large selection of portfolio options, including three SRI portfolios. Betterment has no account minimums but charges a flat 0.25% management fee per year. Betterment also has an intuitive financial planning mobile app, as well as access to human advisors for an additional fee.

RELATED: Betterment Review

Blooom

Bloom is one of the only robo-advisory services that offers help managing your 401(k) account. With a free portfolio analysis available, as well as no account minimums, Blooom helps users avoid costly fees and poor investments in employer-sponsored retirement accounts.

RELATED: Blooom Review

Vanguard Digital Advisor

Vanguard is one of the largest financial firms in the U.S., and its Digital Advisor service offers automated investing using it’s top-rated ETFs. With a low 0.15% annual management fee, user-friendly dashboard, and funds with fees as low as 0.03%, Vanguard Digital Advisor is a low-cost way to set-and-forget your retirement investing. Vanguard also offers its Personal Advisor Services for those that want access to a human advisor to help answer financial questions and build a custom investment plan (for a 0.30% annual fee).

RELATED: Vanguard Digital Advisor Review

Summary

Schwab Intelligent Portfolios offers a hands-off approach for investors who want broad exposure to U.S. and global markets. With a huge selection of ETFs and no annual management fee, it’s hard to go wrong with Schwab.

Younger investors may be wary of the larger cash allocation within most portfolios, as this can cause lower investment returns. But older investors and those in retirement will benefit from the flexible portfolio options, and the ability to opt in to Schwab’s Intelligent Income management for no additional cost.

Overall, Schwab Intelligent Portfolios is a great option for low-cost, automated investing.

RELATED: The Best Robo Advisors

References:

https://www.aboutschwab.com/
https://intelligent.schwab.com/article/rebalancing-in-action
https://about.vanguard.com/who-we-are/fast-facts/