Schwab Intelligent Portfolios

Josh Patoka
December 2, 2020

Schwab Intelligent Portfolios is the fully-automated robo-advisor platform from Charles Schwab—one of the first discount brokers. There are no annual account fees or trade commissions, but the minimum initial investment is $5,000, which is relatively high.

You can upgrade to Schwab Intelligent Portfolios Premium with a $25,000 account balance. Benefits are unlimited certified financial planner access and advanced financial planning tools.

Intelligent Portfolios invests in up to 20 different asset classes including real estate and commodities. Your portfolio can have more diversification than most robo-advisors.

How Does Schwab Intelligent Portfolios Manage Your Money?

The onboarding process for Schwab Intelligent Portfolios is similar to most robo-advisors as you answer twelve questions to make an investment plan. However, Schwab’s interview questions are more in-depth. You can also customize your portfolio more than with other platforms.

For example, you can have Schwab focus more on investing in the United States and reduce exposure to global markets. Other advisors may not give you an option to avoid foreign assets.

This in-depth interview process can help new and experienced investors build an investing plan that’s more personal than most robo-advisors. The customization also lets you enjoy the benefits of DIY investing while enjoying the automated management of a robo-advisor.

Retirees already making investment account withdrawals can open an Intelligent Income portfolio. This income-focused fund can be a better fit for managing wealth and reducing investment risk.

Invest in 20 Asset Classes

Schwab Intelligent Portfolios has one of the most extensive ETF offerings with up to 20 asset classes. You can invest in the standard asset classes, including:

• Large-cap US stocks
• Corporate and government bonds
• Developed and emerging markets
• Master limited partnerships (MLPs)
• US exchange-traded REITs
• US high dividend stocks
• Bank loans
• Commodities

Most robo-advisors invest in standard index ETFs based on market capitalization. Schwab may also invest in fundamental ETFs that can be less volatile than regular index funds. The dividend and alternative asset funds help you earn dividend income in ways other robo-advisors don’t.

Your portfolio holds Schwab and non-Schwab ETFs. Each portfolio has a minimum cash position of 5%. This buffer is larger than most robo-advisors and can reduce your risk exposure, but your potential portfolio income can be lower.

Tax-loss Harvesting

All Intelligent Portfolios practice automatic rebalancing. Schwab only sells assets when necessary to reduce your taxable events while maintaining asset allocation.

Tax-loss harvesting is only available when your account balance reaches $50,000. This threshold is higher than other robo-advisors offering tax-loss harvesting. While this is a high threshold, not all advisors offer tax-loss harvesting.

Schwab lets you invest in tax-sensitive municipal bonds that can reduce your taxable gains without harvesting.

Intelligent Portfolios Premium

A $25,000 account balance lets you upgrade to Intelligent Portfolios Premium. This optional service offers unlimited 1:1 access with a certified financial planner (CFP). These sessions may optimize your investment strategy and plan for other life events.

Premium portfolios also come with extra digital planning tools. These interactive tools help simulate future life events so you can adjust your financial plan.

Your investment options are the same for the free and premium portfolios. You should upgrade to Premium if you want unlimited financial advisor access.

There is a one-time $300 planning fee plus a $30 monthly advisory fee. This fee is relatively high if your account balance is closer to the $25,000 minimum. But the flat fee can be a good deal if your balance is above $100,000. Other robo-advisors charges a fixed percentage, which can be higher than the flat fee with a high account balance.

Advantages of Schwab Intelligent Portfolios

No account fees: You won’t pay any account management fees with Schwab Intelligent Portfolios. The ETF expense ratios are competitive with other robo-advisors. It’s common for robo-advisors to charge a 0.25% annual advisory fee. The optional Premium plan does charge a monthly advisory fee, but you get unlimited 1:1 access to a financial planner.

Invest in up to 20 asset classes: Schwab offers up to 53 ETFs from 20 asset classes to build one of the most diverse robo-advisor portfolios. Some of the ETFs use a fundamental investment strategy that can reduce performance volatility.

Customizable portfolios: You have more options to customize your investment portfolio than with other robo-advisors. It’s possible to build a portfolio that focuses on US assets more than most platforms. Retirees can also create an income-focused portfolio.

Unlimited CFP access: Intelligent Portfolios Premium members get unlimited 1:1 access with a CFP. These sessions and the interactive financial planning tools can make it easier to plan for future life events.

24/7 live chat support: All Intelligent Portfolios offer 24/7 live chat when you need help. While the chat agents cannot provide personal advice, they can help you navigate the Schwab platform and provide technical support. You can also visit a local branch for additional services.

Educational resources: Charles Schwab is one of the largest brokerages. In addition to the in-depth investment tools, Schwab can offer more educational resources than other robo-advisors. New investors can read articles to learn more about investing. All investors can benefit from Schwab’s podcasts and market commentary to monitor current events.

Disadvantages of Schwab Intelligent Portfolios

$5,000 minimum initial investment: Schwab Intelligent Portfolios requires one of the highest initial investments. Most robo-advisors start investing with $500 or less. One advantage of Schwab Intelligent Portfolios is no account advisory fee. You can also get unlimited CFP access by upgrading to Schwab Intelligent Portfolios Premium. 

Minimum 5% cash allocation: All Schwab Intelligent Portfolios hold a minimum 5% cash balance. The allocation can be as high as 30% with more conservative investment plans. This buffer is higher than most robo-advisors and can result in lower long-term performance for the most aggressive investors.

Intelligent Portfolios Premium has a monthly fee: Upgrading to Intelligent Portfolios Premium costs $30 per month plus a one-time $300 advisory fee. This fee is expensive if you have a small account balance. But this premium plan can be worth it if you regularly talk to a financial planner and have an account balance of at least $100,000.

Limited tax-loss harvesting: All Intelligent Portfolios can enable tax-loss harvesting with a minimum $50,000 account balance. This account minimum is higher than other robo-advisors. You can also invest in tax-sensitive municipal bonds ETFs with a small account balance.

Is Schwab Intelligent Portfolios Safe?

The ETFs in your Intelligent Portfolio are subject to normal market losses. Your investment assets are SIPC-insured up to $500,000 with $250,000 for your uninvested cash assets. Lloyd’s of London offers additional protection.

Schwab also places your cash assets into a Schwab bank account that’s FDIC-insured up to $250,000.

All Charles Schwab investment accounts come with a satisfaction guarantee. If you’re unsatisfied with a service, Schwab may reimburse any fees you pay. This guarantee doesn’t reimburse market losses.

Is Schwab Intelligent Portfolios Right For You?

Schwab Intelligent Portfolios is a good option if you want to invest with a well-known broker and want a fee-free robo-advisor. Exposure to over 20 asset classes, the portfolio customization options, and optional access to a Certified Financial Planner are good reasons.

You may avoid Schwab Intelligent Portfolios if you don’t have $5,000 to invest right now. Having a minimum 5% cash balance can also be a deterrent for aggressive investors.