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Charles Schwab dove into the automated arena in 2015, launching Intelligent Portfolios with an unprecedented offer – the service is free with no investment advisory charges. Today, it’s a winner with over 117,000 client accounts, and we are fans.

By Blain Reinkensmeyer / February 21st, 2017 / Updated: May 23rd, 2017

Dislikes
  • Minimum of 6% cash in all portfolios
  • No calculators
  • Inconsistent email support

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The iconic Charles Schwab Corp. was founded by Charles “Chuck” Schwab in 1975 as a brokerage firm. Today, Charles Schwab boasts $2.73 trillion in assets and features 1.6 million corporate retirement plan participants. Schwab launched Intelligent Portfolios in March 2015 to provide a robo-advisor offering. A robo-advisor is a firm that offers digital advice to consumers without human intervention.

Under Schwab Intelligent Portfolios, new clients sign up online by answering a dozen questions evaluating risk tolerance. After answering these questions, the client is placed in an asset-allocation strategy.  Schwab’s questions are similar to those of most firms but one unique query asks about your confidence in making financial decisions.

Schwab Intelligent Portfolios risk questionnaire

As of December 31, 2016, less than two years after its founding, Intelligent Portfolios has accumulated $12.3 billion in assets with 117,000 accounts, making it the largest in the field. Competitor Betterment, which was founded in 2008, has $6 billion in assets.

Investment Approach

First and foremost, the key difference between Schwab Intelligent Portfolios and all other robos is every account maintains a 6% to 29% cash allocation. The average Intelligent Portfolios account has 8% to 10% cash, and the personal account we opened for testing fell within this range at 8.6%. Most of Schwab’s competitors limit cash in accounts to 1% or 2%.

Why do Schwab Intelligent Portfolio accounts hold so much cash? Well, Charles Schwab strongly believes a diversified portfolio with an appropriate cash allocation can deliver better returns than one with no cash. The catch-22 is that Schwab sweeps all portfolio cash each evening into its bank, generating risk-free interest. This is one major reason why Intelligent Portfolios charges no annual fee (more on cost below).

The takeaway is your investment contains a higher amount of cash compared to competitors, which means your portfolio is more conservative. This could impact your returns over the long haul, and it boils down to personal choice.

The takeaway is your investment contains a higher amount of cash compared to competitors, which means your portfolio is more conservative. This could impact your returns over the long haul, and it boils down to personal choice. I prefer an aggressive asset allocation with less cash but I have friends who are squeamish about market volatility and would rest easier with a conservative portfolio.

Another unique factor with Schwab is you can’t switch your asset allocation unless you re-take the risk questionnaire and provide different answers showing your risk tolerance has changed. This is an excellent idea because one of the main attributes of a robo-advisor is to prevent investors from making emotional decisions in a market downturn. At Betterment, clients can switch the asset allocation anytime and at Wealthfront, clients can move strategies once a month. Schwab’s paternal decision may prevent clients from making emotional investment decisions that could be harmful.

One final key difference between Intelligent Portfolios and the rest of the industry is the number of investments in your portfolio. With Betterment, we were placed in 10 funds – all with Vanguard. With Intelligent Portfolios, we were invested in 18 funds. While the bulk of our assets were predictably placed in Schwab funds, my portfolio also included iShares, Vanguard, and a J.P. Morgan currency fund.

Schwab Intelligent Portfolios portfolio holdings

All in all, Schwab has 37 different portfolios it chooses for investors based on risk tolerance. The firm also includes 54 different Exchange Traded Funds (ETFs) – a more robust selection than most of its competitors. Considering all the portfolio construction is automated, clients simply benefit from Schwab’s 42-year history and deep analytical approach to the market.

Cost

Intelligent Portfolios doesn’t charge an advisory fee, commission, or account fees. The only fees charged to clients are the net expense ratios charged by the ETF holdings in the portfolio (every robo-advisor does this). The average portfolio expense ratios range from 0.08% for a conservative portfolio, to 0.19% for a moderate portfolio, and 0.24% for an aggressive portfolio.

Theories aside, the bottom line is clear; Schwab Intelligent Portfolios is hands-down the lowest cost robo in the industry.

Schwab has a $5,000 minimum for Intelligent Portfolios, which is about average in the industry. Being the only robo-advisor in 2017 to charge no annual management fee, the cost savings add up over time in a big way. However, again the trade-off is having a large cash allocation, which Schwab’s competitors will argue outweighs the savings from charging no management fee.  

Theories aside, the bottom line is clear; Schwab Intelligent Portfolios is hands-down the lowest cost robo in the industry. After Charles Schwab was founded in 1975, it revolutionized trading by being the first broker to set a low, flat fee for regular stock trades. Schwab is clearly taking that same innovative stand with Intelligent Portfolios.

Customer Service

I enjoyed Schwab Intelligent Portfolio’s phone customer service. When I called, the representative answered stating the city he/she was based in. Each time, the rep was based in Indianapolis, just two hours from my house. The reps were friendly and answered multiple questions. In terms of phone customer service, Intelligent Portfolios was on par with Betterment and Wealthfront, the two standouts in phone customer service.

When we tested the online chat system in the fall of 2016, it was quick and efficient. However, during testing in December and January, we received frequent “error” messages and were unable to gain a response at all.

When we tested the online chat system in the fall of 2016, it was quick and efficient. However, during testing in December and January, we received frequent “error” messages and were unable to gain a response at all. I also didn’t receive good responses from email. Frankly, I couldn’t find an email address for Intelligent Portfolios. And, when I did email Schwab, I received responses several days later or not at all.

Despite providing great service by phone, Intelligent Portfolios lacks a quality email service (we derived similar findings when we tested Schwab’s stock brokerage arm) and its live chat was mixed, depending on when testing took place.

Tools

Schwab developed the Intelligent Portfolios website as a separate entity from the Schwab website. If you are already a Schwab client you can go to your main dashboard and see an overview of all your Schwab accounts and analyze them in aggregate – a nice touch. That said, if you want to dive deeper into your Intelligent Portfolios assets, you need to go to the Intelligent Portfolios website.

Charles Schwab accounts summary

I found it nice that Intelligent Portfolios has its own website and unique brand design. This is a different strategy than Schwab’s broker competitors Fidelity Go, Merrill Edge Guided Investing, and ETRADE Adaptive Portfolio, which all keep the experience completely on their primary website.

Schwab Intelligent Portfolios account dashboard

Another unique aspect of Intelligent Portfolios is Schwab made a wise decision to feature its “Investing Insights” section on the Intelligent Portfolios page. For Schwab, Investing Insights is its premier in-house research section, filled with articles and market research.

Schwab Intelligent Portfolios Investing Insights

Among a slew of articles and research, clients have access to the Intelligent Portfolios quarterly performance reports which I found to be excellent. With a robo-advisor there is no human advisor to call, so having a detailed market report from the industry leader in research is a huge net benefit.

All in all, the Intelligent Portfolios Investing Insights area is miles ahead of traditional robo-advisors Betterment and Wealthfront and serves as yet another benefit of Intelligent Portfolios being a Schwab brand.

All in all, the Intelligent Portfolios Investing Insights area is miles ahead of traditional robo-advisors Betterment and Wealthfront and serves as yet another benefit of Intelligent Portfolios being a Schwab brand.

In terms of calculators, Intelligent Portfolios doesn’t have traditional calculators; however, the firm does provide its Goal Tracker tool. When you sign up, you set up a goal and choose the time-frame as well as the outcome. Then, you’ll get updates on the site showing where you stand with your goal.

Schwab Intelligent Portfolios goal summary

Goal Tracker makes its assessment based on your account and market performance. This tool is helpful but lacks the depth to compete with the best retirement calculators in the industry. Personal Capital’s Retirement Planner is a standout because you can sync bank accounts, credit cards, and portfolios to provide much more accurate spending predictions. Similarly, Betterment’s RetireGuide is also better than Intelligent Portfolios because it allows you to link outside investment portfolios and use that data to improve recommendations. While Schwab’s main site features a variety of robust tools, its retirement calculator is one tool that has room for improvement.

Finally, in terms of its mobile apps, Schwab continued its strategy of keeping Intelligent Portfolios separate from its traditional app. Schwab’s mobile app is the best among the field.

Finally, in terms of its mobile apps, Schwab continued its strategy of keeping Intelligent Portfolios separate from its traditional app. Schwab’s mobile app is the best among the field. Most of the robo-advisor mobile apps just contain basic information and direct you to the website even to read an article. But with Intelligent Portfolios, you can manage your goals, check your portfolio, and read Investing Insights articles all through the app. It’s a fantastic experience and the app finished No. 1 overall in our 2017 Robo-Advisor Review.

Schwab Intelligent Portfolios mobile app

Other Notes

Intelligent Portfolios makes tax loss harvesting available to clients with at least $50,000 invested. In comparison, Wealthfront and Betterment make those services available to all clients. That said, Fidelity Go and several other competitors don’t offer tax loss harvesting at all. Tax loss harvesting is a program where the firm will sell funds with losses to offset any gains in the hope of reducing a big tax bill.

Schwab allows investors to exclude three ETFs at any time. While impactful in only niche circumstances, this is an important feature for current Charles Schwab clients because you could be heavily invested in these ETFs in your other portfolios. Few competitors provide this functionality.

In December 2016, Charles Schwab revealed that it would be adding a new program, Schwab Intelligent Advisory, to accompany Schwab Intelligent Portfolios. By paying only a 0.28% management fee per year, clients gain access to human advice with CFP professionals. The program is designed to compete with Vanugard Personal Advisor Services. The service officially launched on March 14th, 2017.

Final Thoughts

It’s clear that Charles Schwab executives took a great deal of time building Schwab Intelligent Portfolios. Investing your assets with the trusted Schwab brand is a key advantage over other non-broker robo-advisors such as Betterment and Wealthfront.

The bottom-line is that Intelligent Portfolios has created an exceptional program by offering an innovative, low-cost way to invest in the markets with a detailed approach. It’s really worth considering, and if you’re comfortable with more cash in your portfolio, then Intelligent Portfolios is an easy winner.

Methodology

For our 2017 Robo-Advisor Review we assessed, rated, and ranked eight different firms. Instead of relying on website information and marketing materials as most editorials do, we opened and funded an account with each robo-advisor to acquire a true client experience. Learn more.

Reink Media Group (RMG) remains committed to providing transparent and unbiased reviews of various financial services and segments, including Robo-Investment Advisors (“RIA’s”). Although exempt from registration as an investment advisor under the Investment Advisors Act of 1940, 15 U.S.C. §80b-1, et seq, RMG works tirelessly to ensure compliance with all applicable Security and Exchange Commission rules and regulations for entities which perform reviews and/or receive payments for advertising and solicitation. Please be advised that for purposes to this Review, RMG utilized a live account with actual funding which was later closed once the Review’s test period was complete.

View all Schwab Intelligent Portfolios Fees & Features
Blain Reinkensmeyer

Reviewed by Blain Reinkensmeyer Blain heads research at StockBrokers.com and has been involved in the markets since placing his first stock trade back in 2001. He developed StockBrokers.com's annual review format seven years ago, a format broker executives consider the most thorough in the industry. Blain currently maintains funded accounts with more than a dozen different US-regulated online brokers and has executed thousands of trades throughout his career. He enjoys sharing his experiences through his personal blog, StockTrader.com.


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