Charles Schwab & Co. plans to target mass affluent investors with a hybrid robo model that combines advice from financial advisers with online advice.
With a $25,000 minimum, Schwab Intelligent Advisory will provide clients a customized financial plan and ongoing live advice from certified financial planners, as well as an automated portfolio at a low cost, the company said in an announcement Tuesday. It is scheduled to be offered in the first half of 2017.
“This is a modern approach to financial planning and wealth management that mirrors what today's consumers have come to expect in other aspects of their lives,” said Neesha Hathi, executive vice president of Schwab Investor Services. “How they invest should be no exception.”
The new unit puts the San Francisco-based custodian more in competition with Vanguard Group's Personal Advisor Services, which offers live advice along with a digital investment platform. It has $47 billion in assets, compared with Schwab's robo adviser for retail investors, which has about $10.2 billion.
The move also places Schwab more directly in competition with financial advisory firms to which it provides custodial services.
“To some firms this will create a threat,” said Mark Johannessen, managing director at Sullivan Bruyette Speros & Blayney. “But thinking about the consumer, the ability to get sound fiduciary advice down at that level, is awesome.” His firm has a $1 million investment minimum, or $10,000 minimum annual fee, for new clients.
He did question how comprehensive the planning services will be and not having someone dedicated to actively working to implement and monitor a financial plan.
“I also hope it has the flexibility to adjust with client goals,” he said.
The new offering also competes with Schwab's Institutional Intelligent Portfolios, the digital advice platform that the company sells to advisers to use with clients.
“Many of those RIAs launched SIIP specifically for investors who did not meet the firm's minimums, and now Schwab Intelligent Advisory targets those same prospective customers in the market,” said financial technology expert Bill Winterberg. “RIAs should be concerned about this conflict.”