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Schwab Intelligent Investor Portfolios Now Open for Business
Old 03-09-2015, 07:41 AM   #1
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Schwab Intelligent Investor Portfolios Now Open for Business

It's a separate log-in from the main Schwab site. The "questions" the site asks to identify the goal and the portfolio are lacking. There is no general wealth building goal. However, the really annoying thing is you do not get a list of the ETF's before you invest. I'm sorry, but I want to see the proposed portfolio before I open an account and write a check.

I contacted Schwab and was told the portfolios are "proprietary." Huh? The chat rep said there was a list of ETF's used in the appendix to their white paper on tax loss harvesting. That list appears to be what they used for back testing returns.

So, I'm going to sit back and wait to hear what you all find out. If anyone opens an account and writes a check, please let us know why you did so. Without revealing the "proprietary" information, of course.
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Old 03-09-2015, 01:48 PM   #2
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I have been awaiting the robo advisor program's roll out in the hopes one could mix and match funds while enjoying an embedded re-balancing feature. So I did a search for more info after seeing your post.
At first glance "no cigar" upon reading this news article.

"It’s already raising eyebrows, mainly because there are relatively large cash positions embedded in investment portfolios."

"Schwab boasts that there are “no advisory fees, no account service fees and no commissions charged” on its new portfolios. Instead, Schwab will earn money in less obvious ways.

One is by putting an unusually large amount of cash in the portfolios, ranging from 6 percent of assets in the most aggressive to 30 percent in the most conservative. Investors cannot opt out of the cash allocation."

Schwab raises eyebrows, new issues with robo-investment tool - San Francisco Chronicle
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Old 03-09-2015, 07:21 PM   #3
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Just say NO
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Old 03-09-2015, 09:06 PM   #4
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Schwab appears to be requiring at least some part of the portfolio be deposited in cash at Schwab Bank, at near zero interest, and the portfolios are not just index funds, but include Schwab proprietary "active beta" funds, which are managed at ERs much higher than Vanguard index funds. No free lunch.
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Old 03-09-2015, 09:25 PM   #5
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It seems at least some Bogleheads have sussed out the list of possible investments:
https://www.bogleheads.org/forum/vie...?f=10&t=160555
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Old 03-10-2015, 05:20 PM   #6
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Schwab could have really had something here, if they'd gone with low-cost funds, kept to reasonable (low) levels of cash, and been open about the holdings. Yes, they wouldn't have made much on each account, but they they might have done pretty well over the longer term, and made up a lot on volume. Oh. well.
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Old 03-10-2015, 08:06 PM   #7
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I got a call from a FA at Schwab late today on this new product. He didn't really tell me anything I hadn't read here or at Bogleheads.

For now, I'll just keep buying and selling individual stocks, like I always have.
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Old 03-10-2015, 08:37 PM   #8
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Adam Nash of Wealthfront wrote an article that exactly reflects my opinion. On another forum, I compared Schwab to Merrill Lynch, as he does in his article.


https://medium.com/@adamnash/broken-...es-3d550a27629
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Old 03-10-2015, 08:54 PM   #9
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Adam Nash of Wealthfront wrote an article that exactly reflects my opinion. On another forum, I compared Schwab to Merrill Lynch, as he does in his article.

https://medium.com/@adamnash/broken-...es-3d550a27629
Here is Schwab response to the inaccurate statements:
Response to Blog by Wealthfront CEO Adam Nash | About Schwab).

Pressure is on Betterment, Wealthfront now. They will need to lower fees and add additional benefits, I suspect.

I'm sure articles like this one have had the smaller competitors wondering how this would hit the streets. Schwab stumbles and doesn't get the reaction they expected, so the gloves are coming off.

Schwab Intelligent Portfolios: Game Over For Betterment and Wealthfront?
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Old 03-10-2015, 09:03 PM   #10
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Here is Schwab response to the inaccurate statements:
Response to Blog by Wealthfront CEO Adam Nash | About Schwab).
It is far from forthcoming on the issues Nash raises (and yes, Nash is not a disinterested party).
Soon some folks with time and resources will generate some articles showing us:
- The overall costs of the ERs in the securities inside these opaque portfolios/
- The overall costs of the cash "drag" in these accounts--including comparisons to other alternatives that earn higher rates on cash than Schwab is paying.

"Free"? Not so much. And investors entangled in a proprietary high-expense ETF in their taxable accounts may find the cap gains fee to exit will be punishing.
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Old 03-10-2015, 09:09 PM   #11
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Suggest you also read the following.


Schwab tells the SEC its robo-advisor has a 30 basis-point fee and big-time cash allocations held by Schwab Bank | RIABiz


Playing hide the ball with the fees and forcing high cash allocations as "diversification" so they can skim the spread does not strike me as customer friendly. I'm probably going to move the remaining money I have there away from Schwab.


I detailed my experiences with the two reps that called me yesterday (unsolicited) over at the MMM forum. When the second one stated "I think transparency is overrated" during our discussion of product fees, I concluded I was doing business with the wrong company.
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Old 03-10-2015, 09:26 PM   #12
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Playing hide the ball with the fees and forcing high cash allocations as "diversification" so they can skim the spread does not strike me as customer friendly.
It would be much more honest of Schwab to just charge a fee, and unless the fee were exorbitant it would probably be better for the customer. VGD Target Date funds typically have 1-2% in cash, having 3x to 15x that much in cash (earning, effectively, nothing) is going to produce a fairly big performance hit for the Schwab investor. And then we have the high-cost "smart beta" ETFs to consider . . .
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Old 03-10-2015, 10:00 PM   #13
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It is far from forthcoming on the issues Nash raises (and yes, Nash is not a disinterested party).
Soon some folks with time and resources will generate some articles showing us:
- The overall costs of the ERs in the securities inside these opaque portfolios/
- The overall costs of the cash "drag" in these accounts--including comparisons to other alternatives that earn higher rates on cash than Schwab is paying.

"Free"? Not so much. And investors entangled in a proprietary high-expense ETF in their taxable accounts may find the cap gains fee to exit will be punishing.
I checked two of the ETFs that were offered up at this blog:

Schwab Intelligent Portfolios: An X-Ray | ETF.com

Schwab US Small Cap is 0.08% er, Schwab Fundamental U.S. Small Company is 0.32%, and I wouldn't really know for sure if these are in the basket that is offered.

I can't speak to your criticism of the cash drag. Just pointing out that there is more than one opinion, and more research and reading usually enlighten the individual.
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Old 03-11-2015, 10:42 AM   #14
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i guess the proof of the pudding will be how it compares to one's own efforts to maximize the overall return on one's investments. Will it do better in the long run over setting one's AA an rebalancing every year or so. We need to wait and see how that turns out.

Schwab's ETF funds have pretty low expense ratios, so overall I like the the way they do business.
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Old 03-11-2015, 11:28 PM   #15
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FYI

MMM's thoughts on his Betterment investment:

http://www.mrmoneymustache.com/betterment-vs-vanguard/
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Old 03-15-2015, 12:35 PM   #16
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Had a conversation Thursday night (5 pm) with the Schwab rep who was following up with those customers who had expressed interest. Of course, any sales call that comes at 5 PM always sets me off.

We agreed to disagree:
* that the average expense ratio of any of their portfolios is .03, when I asked for the weighted ER
* that turnover is a component of expense ratio and there is no definition of how frequently re-balancing will occur
* nor is there a back-tested published study of the effect of the asset mix on growth/loss (yeah there are some pretty graphs but no explanation)
* that the cash component was too high (it's where they make the $), and not a good part of asset allocation designed to grow or maintain a portfolio
* that the products selected were too risky (commodities - a gold etf, fundamental etfs, and overall asset allocation strategy skewed to risky investments even for those close to retirement) - but it does give one opportunities for tax loss harvesting
* the on-line application that assesses risk and suggests the portfolio to be implemented continues to favor risky investments, when a well-qualified ethical wealth manager would not suggest certain investments.

So, RUN!

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