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Schwab Puts a Personal Touch on Intelligent Portfolio Construction


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Robo-advisors are a hot topic in the world of financial advice. While long on nifty technology, some robo-advisors lack the personal touch many clients crave.

Charles Schwab’s (NYSE: SCHW) newly minted Schwab Intelligent Portfolios solve that conundrum.. The established brokerage and wealth management firm is able to provide its clients with access to investment professionals 24/7/365 through phone and web chat, as well in person at one of its 325 brick-and-mortar branches across the country—something that existing automated investment services don’t.

Schwab Intelligent Portfolios is also the only automated advisory services that uses algorithms to provide sophisticated advice and automatically monitor and rebalance portfolios without charging any advisory fees, commissions or account services fees.

One advantage of typical robo platforms is low account minimums. Schwab Intelligent Portfolios extend theme and do so with fees and commissions charged to investors. Investors need just $5,000 and a few minutes to answer short questions on Schwab’s intuitive platform to receive portfolio recommendations for their investment objectives. Schwab Intelligent Portfolios automatically adjust as market dynamics change.

“We know there are three controllable variables that have an impact on the long-term success of investors – being and staying invested; having access to quality investment advice and money management; and keeping costs low,” said Schwab executive vice president Naureen Hassan, who leads the team responsible for Schwab Intelligent Portfolios, in a statement.

Schwab Intelligent Portfolios, which will be available to advisors in the second quarter, are ETF-based and offer investors exposure to up to 20 diversified asset classes including, stocks, bonds and real estate across U.S., international and emerging markets.

Schwab uses a four-step quantitative process to select the ETFs for the intelligent portfolios, which includes factors such as emotional and financial capacity for risk. Only ETFs with at least $20 million in assets under management are eligible to be included in Schwab Intelligent Portfolios. Other selection criteria include bid-ask spread, tracking consistency, and operating expense ratio. [Inside Robo-Advisors]

Schwab was issuer agnostic in its selection of ETFs for use in the intelligent portfolios. In addition to 14 Schwab ETFs, the intelligent portfolios include access to 12 Vanguard funds and eight ETFs from BlackRock’s iShares, among other issuers. ETFs from a total of 11 issuers are available through Schwab Intelligent Portfolios. Eight of the 54 intelligent portfolio ETFs are available on Schwab’s fast-growing commission-free ETF platform, Schwab ETF OneSource.

Earlier this year, Schwab expanded OneSource to include nearly 200 ETFs. OneSource, the largest commission-free ETF platform on the market today, has been a significant driver of ETF asset growth for Schwab. Last year, ETF assets custodied at Schwab surged 18% to $231 billion, according to the firm’s fourth-quarter and 2014 snapshot. [Schwab ETF OneSource Lineup Grows Again]

Schwab Intelligent Portfolios feature the ease-of-use and intuitive technology some investors have come to crave from robo-advisors. For example, clients can fund accounts using mobile check deposit and go paperless. The platform is so robust that it is fully accessible from mobile devices.

However, the use of technology by Schwab Intelligent Portfolios does not imply the service is limited to a specific age demographic. While many robo-advisors and other financial services firms are heavily focused on millennials and opt to ignore Generations X and Y, Schwab notes a broad swath of investors, ranging in age from 20 to 70 years old, have expressed interest in the service . In addition, half of Schwab’s current clients who expressed interest in Schwab Intelligent Portfolios have at least $250,000 in assets.

Illustration Courtesy: Charles Schwab

Schwab Discusses ETF Lineup, Commission-Free Platform, click to learn more.

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