Schwab launches free financial planning tool

The brokerage joins a list of industry players touting free or low-cost financial planning apps to attract younger clientele

Charles Schwab announced Thursday the launch of Schwab Plan, a self-guided digital financial planning tool designed to help investors establish retirement goals and stay the course.

The free tool is available to all Schwab investors through the brokerage’s website with no minimum asset requirement, according to the announcement. Schwab Plan works by having clients complete a short questionnaire, then the tool generates a retirement plan in 15 minutes — showing the client retirement goals and probability of funding those goals, according to Schwab Chief Digital Officer Neesha Hathi.

The tool provides a comparison of current asset allocation to a recommended allocation based on plan inputs and suggests next steps to get and stay on track. The tool can also aggregate and factor in accounts held outside of Schwab.

Schwab also launched an online financial planning hub to provide users with planning tools like goals-based calculators and educational planning content to help investors learn more about retirement.

The discount brokerage joins other industry players, most notably Fidelity Investments, which rolled out its free mobile app, Fidelity Spire in July, to offer free financial planning applications designed to capture potential clientele and bring on additional assets with other financial service products.

The trend of attracting younger clients with free applications was spurred by the market volatility that has caused young investors to seek out financial planning advice, according to Fidelity.

While Schwab might not generate a profit directly from the new Schwab Plan tool, the firm stands to benefit from greater engagement from clients and interest from prospective clients.

“The intensity of the battle for new customers is higher than ever before,” said David Goldstone, head of research for Backend Benchmarking. “Digital advice products have already brought minimums to near zero while free-trading has removed commissions across the industry.”

Now firms are finding new ways to attract clients into their first financial services relationship and competition is heating up. “Increased competition in the industry will benefit the end customer as costs come down and digital tools increase in accessibility and quality,” he said.

Personal Capital, for one, has offered a free dashboard for investors to sync their accounts and get a single view of their cash, investments and liabilities, and to receive basic financial planning around retirement or other savings goals. In 2018, Wealthfront made its financial planning software free for users after downloading the mobile app.

For advisers, the roll out of free or low-cost financial planning tools should raise the question of whether it will decrease or increase the attractiveness of paying for premium planning services, according to Celent’s Head of Wealth Management William Trout.

“I don’t think advisors will be harmed by the introduction of free, direct-to-consumer platforms like this one,” Trout said. “Advisers stand to benefit from the trend to commoditization, in terms of their tech spend, as well as greater awareness of the value and centrality of planning to the investor.”

In that light, platforms like Schwab Plan could function as a stepping stone for younger, upwardly mobile investors who will eventually become full-fledged planning clients that will use an advisor, especially as their needs evolve and become more sensitive, according to Trout.

EMoney Advisor’s director of product management Lisa Graham concurred, saying that free financial planning tools won’t change clients’ needs to work with a professional.

“In fact, it should get clients more comfortable with the idea of working with an adviser,” she said. “Financial planning is so complex, a free tool is not going to factor the other variables of a person’s life that a financial adviser can.”