Investing

What Are Schwab Intelligent Portfolios, And Are They Any Good?

Javier Simon

Published: March 29, 2024 12:47 pm

Last Updated: April 4, 2024 3:03 am

Schwab Intelligent Portfolios are the robo-advisor services of Charles Schwab, a leading brokerage firm that has been around since the 1970s.

Robo-advisors may be good options for beginners and hands-off investors. Schwab Intelligent Portfolios builds, manages and automatically rebalances a diversified portfolio based on factors like your financial goals and risk tolerance.

These portfolios are built with low-cost exchange-traded funds (ETFs), which may invest in a variety of securities like stocks and are professionally managed.

And unlike many of its competitors, the Schwab robo-advisor charges no advisory management fee. However, it requires a minimum investment of $5,000.

How Schwab Intelligent Portfolios work

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When you open a Schwab Intelligent Portfolios account, you answer a short questionnaire to determine your financial goals, appetite for risk and timeline to invest.

The robo-advisor then recommends a diversified portfolio based on your answers. These portfolios can come in 80 different variations and can contain ETFs from a menu of 51 different funds monitored and selected by Schwab experts. These portfolios may invest in various securities including stocks, bonds, cash, commodities and real estate investment trusts (REITs).

Schwab Robo-Advisor Fees

Schwab doesn’t charge an annual advisory fee for its Intelligent Portfolios. But as with many ETF-based investments, customers’ accounts would bear the expense ratios or management fees charged by ETF companies. Still, expense ratios for ETFs in Schwab Intelligent Portfolios are competitively low ranging from 0.02% to 0.19%.

The brokerage firm also offers Schwab Intelligent Portfolios Premium. This offers unlimited access to a certified financial planner (CFP). These professionals can offer guidance on several aspects of your financial life including budgeting, savings, paying down debt, saving for retirement and investing in a loved one’s college education.

However, the premium service requires a $300 one-time planning fee and a $30 monthly advisory fee afterward.

Additionally, Schwab earns money from the cash portion of your portfolio, which is invested in an FDIC-insured account at Schwab Bank. And although you’d earn interest on these deposits, you may find higher-yield options elsewhere.

Schwab also receives compensation from some of the ETFs on its robo-advisor platform for providing shareholder services.

Schwab’s Automated Investing Platform Stacks Up: Benefits

Schwab Intelligent Portfolios stand out for various features including the following.

• 0% advisory fee
• Diversified portfolios with low-cost ETFs
• 24/7 customer support
• Access to CFPs with the premium plan
• Various account types: Taxable brokerage account, individual retirement account (IRA), Roth IRA, custodial and trust accounts
• Tax-loss harvesting: Clients with accounts of at least $50,000 get tax-loss harvesting services. This is an automated process of selling investments at a loss to offset capital gains taxes from investments that earn a profit.

The Verdict: Is Schwab Intelligent Portfolios Worth it?

Schwab Intelligent Portfolios deliver when it comes to portfolio diversification. Based on individual factors, your recommended portfolio can come from 80 different varieties and be built from funds in a 50+ ETF selection that may offer exposure to more than 20 asset classes.

Schwab also stands out for charging no advisory fee on the standard robo-advisor account. Customers would also have the option to save in tax-advantaged accounts like traditional and Roth IRAs. These are tax-advantaged retirement plans. You can deduct contributions made to a Schwab traditional IRA from your taxable income. And you can make tax-free withdraws with a Schwab Roth IRA.

Overall, beginners and hands-off investors may be happy to open a taxable brokerage or IRA account with Schwab Intelligent Portfolios, knowing the company also has a long track record in providing award-winning services.

But the minimum $5,000 investment may be a bit too steep for some. You may find similar options with Fidelity Investments or Betterment, which require little-to-no minimum investments.

But those who have more complex financial needs and can afford the $300 opening fee along with the $30 monthly advisory fee may benefit from Schwab Intelligent Portfolios Premium which comes with unlimited access to a CFP.

But one point to weigh in is that Schwab Intelligent Portfolios have received some criticism for devoting larger-than-standard cash portions to its portfolio options. Even though this cash would earn interest, it won’t be invested in the markets. According to Schwab, these cash allocations typically range from 6% to 10%.

Moreover, tax-loss harvesting services are only available to clients with taxable brokerage accounts of at least $50,000. So those with larger investing power may find  Schwab Intelligent Portfolios suitable.

But if you have even larger assets to manage, you may want to look into Schwab Advisor Services. This program features a team of financial advisors that can offer guidance on every aspect of your financial life including retirement, tax planning, estate planning and saving for your children’s college education. If you want to start investing in your children’s higher education now, you can take a look at the Schwab 529 college savings plan.

And if you want to learn more about how Schwab can help you meet your financial needs, check out our regularly updated list of Charles Schwab guides, news and coverage.