Schwab Robo Advisor

[EarlyBirdly]

Do any of you use Schwab's Intelligent Portfolio robo-advisor?


Thoughts and/or experience ?



BirdMan

 

[DanP]

I spread some $ in Schwab, Betterment and WealthFront a few years back, closed WF but still have the other two. Schwab & Bettement seem to have similar performance for my particular risk profile.

At the time I opened those for institution diversification and "set and forget" allocation. And that they do well, although not a big deal to do in Vanguard / Fidelity with a little homework (so question the .25% Betterment value).

A significant concern (and possible that I am wrong) is that when the time comes to make regular withdrawals there is no way to pick and choose what to sell (tax concern), as they will pro-rate the withdrawal to maintain the target allocation.

Looking forward to other replies.

 

[T-Minus]

I was interested finding out more about Schwab’s robo-advisor but, in a conversation with my local Schwab-guy, discovered that the “Robo” could not differentiate between different types of accounts (i.e. Roth, IRA, Brokerage) and differing tax treatments, and could not take other factors into account (i.e. Treasury Direct bonds held, CD held in another institution, etc.) when appropraitely allocating remaining funds. Until it can address situations like these, I’m not intertested.

 

[EarlyBirdly]

I was interested finding out more about Schwab’s robo-advisor but, in a conversation with my local Schwab-guy, discovered that the “Robo” could not differentiate between different types of accounts (i.e. Roth, IRA, Brokerage) and differing tax treatments, and could not take other factors into account (i.e. Treasury Direct bonds held, CD held in another institution, etc.) when appropraitely allocating remaining funds. Until it can address situations like these, I’m not intertested.

I'm not sure it was ever intended to cover that scope of investments. (?)


However, it is basically a free tool so, what the Heck.


I think it would be fine for just a Traditional IRA but, "think" is sometimes a bad word. I do not know.


Hence, this thread!

 

[gayl]

I tried the robo adviser program at Schwab with just 100k & put 100k into my own version: 60% SCHB / 30% SCHF / 10% cash. Did better on my own

 

[OldShooter]

I tried the robo adviser program at Schwab with just 100k & put 100k into my own version: 60% SCHB / 30% SCHF / 10% cash. Did better on my own

I did more or less the same thing. $100K IRA test portfolio for a couple of years, benchmarked against my "standard" benchmark -- a $100K couch potato equity portfolio that started on 1/1/2014 at 65% US and 35% international and has just run without being touched.

For someone who does not want to play with their food (wise) it's not a bad alternative. Points:

I fiddled with the questionnaire to minimize the amount of cash being held. Since their robot model assumes that it has the entire customer portfolio it will not allow a 100% equity allocation. I got so close, though, that I actually got a call from a Schwab guy who intended to counsel me on such an aggressive portfolio. Good for them! I explained the experiment and that was the end of the calls.

The way Schwab makes a little money on the accounts is to sweep cash to Schwab Bank and pay a very low interest rate. OK, I guess. They have to make money somewhere.

The portfolio the robot built was needlessly complex. IIRC about 8 funds for $100K As a practical matter, when it bought large, mid, and small cap funds it might as well have bought a total market fund, but they also have the problem (like any advisor) of not teaching the customer how simple things can be.

After a 2-year run, performance was not quite as good as my benchmark portfolio but it was entirely adequate. I closed out the account primarily because my portfolio reports were junked up with all those tiny positions and because I was satisfied that I had learned what I wanted to learn.

HTH

 

[FreeBear]

The portfolio the robot built was needlessly complex. IIRC about 8 funds for $100K As a practical matter, when it bought large, mid, and small cap funds it might as well have bought a total market fund, but they also have the problem (like any advisor) of not teaching the customer how simple things can be.

Sounds familiar. Visited a discount brokerage a few years ago to hear a FA's pitch. He proposed over a dozen narrow sector ETF, each with an expense ratio, on top of his 0.5-1.0% (don't remember exactly). It was basically a robo-advisor that he would set up and charge 1.0% to talk to me a yearly (no steak dinner since we didn't offer a big piece of the pie). Didn't ask any questions regarding long term goals and other assets. So not really financial planning, just wanted a piece of my pie.

Seems like the new robo advisors are much cheaper since you don't have to always go through the brokerage's FA human interface. Still, I just keep everything in a few VG/Fido broad market/total market bond and equity funds. For me, I just don't see the advantage of micromanaging (via robo advisor) and ending up with something that presumably looks like total market, but gerrymandered along the way. Also, I'm afraid to the robo churning (needless buying and selling) funds according to some program. I guess I'm just old skool buy, hold, and snooze....

 

[OldShooter]

... Seems like the new robo advisors are much cheaper since you don't have to always go through the brokerage's FA human interface. Still, I just keep everything in a few VG/Fido broad market/total market bond and equity funds. For me, I just don't see the advantage of micromanaging (via robo advisor) and ending up with something that presumably looks like total market, but gerrymandered along the way. Also, I'm afraid to the robo churning (needless buying and selling) funds according to some program. I guess I'm just old skool buy, hold, and snooze....

Well, different strokes for different folks. I keep an eye on these because of the adult-ed investment class I teach. Many people are intimidated by investing and are willing to pay something to get peace of mind. Good for them that the robos are an inexpensive option.

Re human contact, when the robos first appeared they were at zero human contact. In the past couple of years it seems that most of them have added a slightly higher cost option with contact above zero. I assume that their market was asking for this.

Re churning, in my 2 year experiment during a low-volatility market period, I don't recall the the Schwab robot made a single trade. In fact I called and initiated a trade at one point because all of the fund dividends were being swept into the near-zero-interest Schwab Bank account.

 

[bushpilot]

I have about 25% of my IRA funds in Schwab's, and I am satisfied with it. It has a little less volatility than my other more aggressive accounts.

Regarding the tax question - they do automate loss harvesting for traditional brokerage accounts. I don't know the methodology used, or how withdrawals work into that.