Charles Schwab Intelligent Portfolios Premium

[a60dan]

Interested in hearing from anyone who may be subscribing to this service, specifically the Charles Schwab product.

https://www.schwab.com/public/schwab/investment_advice/intelligent_advisory

• How long?
• Performance vs expectation
• Satisfaction
• Contact with the advisors
• existing investments transferred in
• lower return on Schwab-defined "cash" is an indirect fee
• etc.

In my case I have had Schwab IRAs since 1980s (20%), Fidelity 401K (30%), Company profit sharing (30%). Most of our assets are in tax deferred retirement accounts.

I intend to consolidate the accounts in the next 2-5 years, and am very interested in hearing from actual customers.

Presently we are paying 1% for 3rd party advisor only on the funds at Schwab.

This review describes the product, and emphasizes the downside of the cash component in the robo-advisor component:
https://www.mymoneyblog.com/schwab-intelligent-portfolios-premium-feature-review.html

 

[OldShooter]

Interested in hearing from anyone who may be subscribing to this service, specifically the Charles Schwab product. ...

I recently finished up a two-year experiment with $100K in the Schwab robot. I had the original flavor with no human contact and no fee.

I opened the account on the first day of a quarter just for easy benchmarking. I had to fool around gaming the questionnaire so I could minimize the cash it held and was about 95% equities. The positions chosen were mostly in Schwab funds; an entirely ridiculous number of issues: twelve! I think they do this to make investing look more difficult than it is. (In fact one time an FA friend admitted this to me.) In the two years I don't remember that the robot ever made a trade.

I tracked it against my standard "couch potato" equity benchmark, which is not rebalanced but is about 2/3 total US stock market and 1/3 total International.

The experiment ran from 4/1/15 to 3/31/17. During that period the robot gave me a cumulative 10.9% and the benchmark gave me 12.2%. If I adjusted the numbers to reflect that the robot hadn't invested all the money, the robot's equity-only portion gave me 11.5%. The two portfolios tracked very closely.

My conclusion was that the robot would probably be a satisfactory tool for someone who just wanted to set and forget. It didn't bother me, I didn't bother it, and things worked out just fine. I terminated the experiment because it was junking up my portfolio records with tiny positions in funds that I wasn't otherwise using, so it was more a matter of housecleaning than anything else.

I guess if you're going to waste money, the robot is going to be cheaper than a 1% AUM. But, really, on the equity side all you need to do is to duplicate my benchmark or go with 100% VTWSX, which is where our serious money is. There's no need to pay a fee to anyone. There is almost zero chance that they can add value enough to offset their fees.

 

[Mykle57]

I really wanted to like it!

Looked at Schwab's robot service but haven't jumped in. Most of the online info about it seems to be fluff marketing stuff and dry comparisons with competing robo services. Little in the way of actual data.

Also noted their sample portfolios have numerous funds, many of which have a very small allocations. Too much idle cash seems to be a drag on the portfolio (especially if they don't use it to rebalance). The whole strategy seemed confusing to me.

Anyone else looking at Schwab's robot services?

 

[OldShooter]

I really wanted to like it! ...

Well, I didn't say I didn't like it. We run our own money so there was never any question of giving the robot our portfolio. I just wanted to see what it invested in and what a couple of years' history looked like. No way is two years enough to be making any kind of projections, though. (I pretty much always have one or two small test portfolios going. I have one in DFA funds right now, waiting for the two-year mark.)

That said, if I were looking for a financial advisor I would strongly prefer a properly programmed robot to a meat-based advisor. A robot is not vulnerable to the many behavioral problems we humans are prone to, like the endowment effect, recency bias, herding, trying to call tops and bottoms, random rebalancing decisions, etc. This is all looking at the equity side. On the FI side, I would like a robot that would buy individual bonds but I think finding such a robot might be impossible. But all that is me; YMMV.

... Little in the way of actual data....

I am no expert but I believe that there are some very significant SEC/legal obstacles to any advisor's reporting investment results. Too easy to be cherry-picking.

 

[Gotadimple]

Nope, not interested. Saw it when it first came out. As mentioned many funds sliced and diced. Discussed with a Schwab rep who insisted it'd been back-tested. Looked like a way average out performance, and churn for transactions. By churn, I mean what they earn from the funds, to show increasing investments - not what is charged a client. Fees are very low.



One can use the Coffeehouse Portfolio method to create a portfolio with 3 or 4 ETFs and probably do better than their results.
- Rita

 

[OldShooter]

... One can use the Coffeehouse Portfolio method to create a portfolio with 3 or 4 ETFs and probably do better than their results. - Rita

I don't know why you'd need that many. My benchmark had only two.

 

[MikeTN]

Yes, I have a Schwab robo account

I don't do a good job of disciplined rebalancing, and figured that the benefits of that in the robo account might make it worthwhile, given low costs.

I have mine set very aggressive so 85% equities, and only 8% cash, so low rates on cash were not much concern.

Schwab put some of the equity money into their "fundamental" index funds which are not market cap weighted. They charge higher fees on these. I doubt it is worth it but perhaps may be.

Overall, it may be the cheapest robo account if you are aggressive, but I'm not sure it provides much value. You could get a few funds and rebalance yourself, or get an allocation fund like Fidelity's Four in One fund and probably do just as well.

 

[DrRoy]

I recently finished up a two-year experiment with $100K in the Schwab robot.

Very useful review. Shows the value of DIY.

 

[OldShooter]

Very useful review. Shows the value of DIY.

Thank you. I have found that I pay closer attention to games played with real money.

 

[youbet]

I'm a long time, satisfied customer of Schwab. But I investigated their robo-managed offerings and decided they are not for me. Schwab fits DW and I to a tee in many regards but a few of their "side-gigs" like robo-management and options trading just don't need to be on our plates. And they aren't.

The main things I didn't find attractive about their robo-management program are:

1. Two many proprietary funds. (Or maybe just too many funds, period.)

2. Inefficient management of cash.

BTW, I help the widow of a deceased friend keep track of her managed Fidelity portfolio by telling her what the AA actually is vs a common target for her age and also looking for any shark attacks or inefficiencies. She has the same issues there.

 

[Gotadimple]

I don't know why you'd need that many. My benchmark had only two.

Two is good. My 4 would include a TIPS ETF and an International Bond Fund.


- Rita

 

[OldShooter]

Two is good. My 4 would include a TIPS ETF and an International Bond Fund. - Rita

OK, different scope. Our full AA relies on individual TIPS -- no need to pay a fee for what is basically clerical work. It does not include racy stuff like junk or international. Why add risk an volatility to the "safe" side of the AA? IMO those belong on the equity side.

Thread drift, I know.

 

[triangle]

Why would the Schwab Robo advisor (or any similar robo advisor) insist that the client hold a cash position? Is there not an option to say "no" that there is already a separate cash position that will remain separate. A Robo without options to indicate that one is only looking for advice for investing a certain portion of their overall assets, or a certain goal like not accessing the money until Y years in the future seems quite limiting.

I might expect the typical person to have some tax deferred and after tax assets. Factor in a spouse who might also have separate account(s), pension, etc, it seems that a robot overseeing only one of those accounts would do a poor job.

 

[target2019]

Why would the Schwab Robo advisor (or any similar robo advisor) insist that the client hold a cash position? Is there not an option to say "no" that there is already a separate cash position that will remain separate. A Robo without options to indicate that one is only looking for advice for investing a certain portion of their overall assets, or a certain goal like not accessing the money until Y years in the future seems quite limiting.

Schwab makes money from uninvested cash. It's that simple.

 

[OldShooter]

... I might expect the typical person to have some tax deferred and after tax assets. Factor in a spouse who might also have separate account(s), pension, etc, it seems that a robot overseeing only one of those accounts would do a poor job.

I don't think the robo concept was ever intended to deal with complex situations. AFIK Wealthpoint and Betterment were aiming at young people, new to investing, without assets large enough to justify professional advice. There was a lot of emphasis on having a low minimum portfolio size.

When I opened my test account the on-line questions where what you might expect: age, risk tolerance, goals, etc. and the resulting allocation was a complete portfolio as if my $100K was the only account I had. That's why I had to game the questions so much to get to 95% equity.

But how could they do anything else?

I'll give credit to Schwab, too: Some time after I funded the account I got a call. The computer had apparently noticed that I was old and retired with a tiny portfolio all in equities. He was making a sanity check. It was a short call after I explained to him that this was a test and was a small fraction of a much larger portfolio. Not to worry, IOW. But I did thank him for the call.

 

[triangle]

I don't think the robo concept was ever intended to deal with complex situations. AFIK Wealthpoint and Betterment were aiming at young people, new to investing, without assets large enough to justify professional advice. There was a lot of emphasis on having a low minimum portfolio size.

When I opened my test account the on-line questions where what you might expect: age, risk tolerance, goals, etc. and the resulting allocation was a complete portfolio as if my $100K was the only account I had. That's why I had to game the questions so much to get to 95% equity.

But how could they do anything else?

I'll give credit to Schwab, too: Some time after I funded the account I got a call. The computer had apparently noticed that I was old and retired with a tiny portfolio all in equities. He was making a sanity check. It was a short call after I explained to him that this was a test and was a small fraction of a much larger portfolio. Not to worry, IOW. But I did thank him for the call.

Before I read this thread I had expected these Robo advisors to be more sophisticated. To take a two step approach, where step 1 would have the client list all household assets. e.g. home value, retirement accounts, investment accounts, CD/savings, a ballpark of SS contributions, etc. And then as step 2 do its thing in determining which investments it should recommend in this larger context, only after understanding which slice of the financial pie it was helping to manage. To basically mimic what a human advisor might do on a first pass look at the persons needs.

Where version 1 of the Robot might be simple minded and only support listing the percentage of stocks/bonds/cash in these other accounts. Version 2 could allow the user to list specific securities so that it has a very detailed look. I would think a detailed Robot coupled with something like a retirement needs calculator would give Schwab a detailed picture of their client that could help them market their services.

 

[target2019]

I wonder if due diligence has something to do with some advisors, robo or otherwize, not including your other cash, real assets and so on. It is not known if what the investor reports is true now, or even into the future. I know my house may net $300K when sold, but an advisor may see that as part of the future (a one timer, so to speak). So due diligence has me put it down as part of spend-down, but not include it as part of AA.

 

[retired1]

• How long? ~8-9 Months
• Performance vs expectation ~Performance as expected.
• Satisfaction ~ Satisfied. It has freed me up
• Contact with the advisors ~ No contact with advisors. I'm all DIY.
• existing investments transferred in ~ Yes.
• lower return on Schwab-defined "cash" is an indirect fee
• etc.

Overall I'm satisfied with this approach. There is $0 fees and portfolio automatically buys/sells & tax-harvests for me. It has freed up my time quite a bit. However I still do some hands-on over at Vanguard & Fidelity.

 

[TB1960]

Just like OldShooter I am going to give this a two year try. Below is how Schwab allocated my 50k investment after I answered their questionnaire.
TB1960

ASSET ALLOCATION

Stocks Pending: Stocks Allocations (36%)
US Large Company Stocks 8%
US Large Company Stocks - Fundamental 5%
US Small Company Stocks 5%
US Small Company Stocks - Fundamental 3%
International Developed Large Company Stocks - Fundamental 3%
International Emerging Market Stocks - Fundamental 3%
International Developed Large Company Stocks 2%
International Developed Small Company Stocks - Fundamental 2%
International Emerging Market Stocks 2%
International Developed Small Company Stocks 1%
US Exchange-Traded REITs 1%
International Exchange-Traded REITs 1%

Fixed Income Pending: Fixed Income Allocations (49.2%)
US Securitized Bonds 20.2%
US Inflation Protected Bonds 19%
US Investment Grade Corporate Bonds 6%
US Treasuries 2%
US Corporate High Yield Bonds 1%
International Emerging Market Bonds 1%

Commodities Pending: Commodities Allocations (1%)
Gold and Other Precious Metals 1%

Cash Pending: Cash Allocations (13.8%)
Cash 13.8%

 

[Ncc1701]

Intelligent Portfolios can be a great tool for delegators or those who are currently paying 75bps or more for an advisor. And for those that want human contact, $30/month for the CFP version (Premium) version is pretty darn good. I would be mindful of a couple of things:

1. Initially there was no "US Focused" version and the equity allocations had a lot of international that held back returns. Make sure you get the version that reflects your preference.

2. Yes the cash allocation is a drag but I prefer to look at it as an extra fee. I equate the 10% cash allocation as adding an additional 25-30 bps in fees. So when you add that to the average ETF expenses of 15bps, a total fee for a managed service of 40-45 bps is not bad at all. Certainly doesn't beat DIY but for the investor that needs help, its a good deal IMHO.

3. People underestimate the value of the automatic rebalancing and tax loss harvesting. Again, for people that delegate their investment decisions, this is a valuable service.

 

[kitesurfer2]

i have no complaints with CS. USAA dumped my money on them and i was forced to learn a little. then i moved it all to CS. i have both the robo service and the managed service. i've visited my advisor twice with no hassles at all. he emails me regularly and calls too. i am the guy who walks away and lets them do their job.

 

[Indiana Randy]

One year ago I split my IRA money with Schwab in half. I split it equally between the Intelligent Portfolio (robo investor) and MY picks of Index Funds.

Robo investor has the $100K investment split between 22 funds and YTD returned 12.98%. The Index funds, 4, have returned 23.47%.

 

[OldShooter]

One year ago I split my IRA money with Schwab in half. I split it equally between the Intelligent Portfolio (robo investor) and MY picks of Index Funds.

Robo investor has the $100K investment split between 22 funds and YTD returned 12.98%. The Index funds, 4, have returned 23.47%.

Wow. That's quite a difference. Were your selections sector funds where you got lucky or did Schwab fall on its nose somehow?

As mentioned I tried them with $100K over two years vs 65/35 US/International total market funds and the Schwab results were close, but slightly behind, the 65/35 portfolio.