Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Schwab Moving To Subscription Fees Could Be Watershed Moment For Advice Industry
FYI: Charles Schwab's announcement Thursday that it was moving from an assets-under-management fee to a flat monthly charge for its robo adviser sent shock waves throughout the industry.
Just a clarification as I understand it, Schwab Intelligent Portfolios (robos) don't have a fee at all to own (Schwab makes its money in robos by using many Schwab ETFs and placing a substantial cash portion of the portfolio in their their own savings account) . Any how, the .28% fee has been for the Intelligent Advisory option which essentially is having a financial adviser via phone or computer to help you with planning. I have not subscribed to the adviser option, but with this lower price I'd have to think about the potential benefits again.
One thing I remember by local Schwab guy telling me when the Advisory option to Intelligent Portfolios came out was that there was no obligation to continue the service indefinitely. Basically you could subscribe, use the services to set up your financial plan and opt-out after you had what you needed. Bet this new pay scheme might have been in response to people doing just that.
Basically you could subscribe, use the services to set up your financial plan and opt-out after you had what you needed. Bet this new pay scheme might have been in response to people doing just that.
If one uses their services wisely to set up their retirement, estate planning, and others, the on-going service could be very useful as the client's mental capacity decline slowly over time. The article also questions how deep the advisory team is? Certainly this is beyond a robo type service.
Charles Schwab's announcement Thursday that it was moving from an assets-under-management fee to a flat monthly charge for its robo adviser sent shock waves throughout the industry.
I think it is tied to the robo service @Sven. It's been available for a couple years now, just a different fee structure. You have to be in Intelligent Portfolio (robo) to use this service is the way I read this.
@MikeM's observation that absent the $300 entry fee, people were likely paying fees for just a month or two to get the more costly initial financial planning and then dropping the service makes sense.
ISTM the comments @Derf alluded to on the original site, that question the ability of Schwab staff to deliver services with this reduced pricing are missing the point. These services, whether robo or hybrid represent the industry's attempt to bring "advice" down to the "mass affluent" ($100K+) investors, largely through automation. https://www.wealthmanagement.com/blog/serving-mass-affluent-market-technology
These services are focused primarily on asset allocation (and selecting securities to match), with only a touch of human involvement thrown in. Easy for Schwab (or anyone) to provide. They draw in customers, and as first mover on flat rate pricing, Schwab can expect to draw in many more customers. In the future some of them will move up to higher level, higher cost services. Regardless, there will be more assets in the managed accounts invested in Schwab ETFs.
The SIP Premium Program combines the discretionary portfolio management of the SIP Program, as described above, with the additional features of financial planning and ongoing access to guidance from Schwab Planning Consultants, as well as to online financial planning tools. SIP Premium Accounts are invested in SIP portfolios and managed on a discretionary basis through the SIP Program. Unless other-wise indicated, descriptions of portfolio management through SIP apply to SIP Premium as well.
Comments
Derf
Year 2 and on: 12X$30 = $360
Advisors operating based on AUM will have a sizable hurdle to overcome fee at this level. Who is next to lower their fee, Vanguard?
One thing I remember by local Schwab guy telling me when the Advisory option to Intelligent Portfolios came out was that there was no obligation to continue the service indefinitely. Basically you could subscribe, use the services to set up your financial plan and opt-out after you had what you needed. Bet this new pay scheme might have been in response to people doing just that.
ISTM the comments @Derf alluded to on the original site, that question the ability of Schwab staff to deliver services with this reduced pricing are missing the point. These services, whether robo or hybrid represent the industry's attempt to bring "advice" down to the "mass affluent" ($100K+) investors, largely through automation.
https://www.wealthmanagement.com/blog/serving-mass-affluent-market-technology
These services are focused primarily on asset allocation (and selecting securities to match), with only a touch of human involvement thrown in. Easy for Schwab (or anyone) to provide. They draw in customers, and as first mover on flat rate pricing, Schwab can expect to draw in many more customers. In the future some of them will move up to higher level, higher cost services. Regardless, there will be more assets in the managed accounts invested in Schwab ETFs.
Here's the full Schwab disclosure:https://www.schwab.com/public/file/CMS-BDL100049
The Premium program (the one with a fee) is the robo program plus. A little human interaction and DIY tools.