Schwab to launch adviser robo in Q2; consumer version unveiled today

Charles Schwab & Co. will unveil its white label online platform for advisers in the second quarter. The adviser robo platform, known as Institutional Intelligent Portfolios, will be available in two options – one at no charge to advisers and another with a fee that would allow for customization. With this platform, advisers can apply their own branding and modify asset allocations from eligible ETFs. It will be available to registered investment advisers who custody their client assets with Schwab. The announcement came on Monday following the launch of Intelligent Portfolios, an algorithm-based investing platform to build, monitor and rebalance diversified portfolios. The program, which will be free to consumers, will assess an investor's goals and risk tolerance with a set of questions. Investors with $5,000 will receive recommendations based on their answers. The algorithms will assist clients in building and managing their portfolios in low-cost exchange-traded funds with up to 20 asset classes. “This really is about expanding the number of people who could get advice,” Naureen Hassan, executive vice president of investor services, segments and platforms at Schwab said. Intelligent Portfolios the San Francisco-based firm's first entry into the robo field, and is expected to give stiff competition to companies such as Wealthfront and Betterment, both of which focus on automated investing. Schwab will make allocations to its own products that rely on developed indexes by Research Affiliates, according to an InvestmentNews analysis of Schwab's disclosures about the fund-selection criteria. Bill Doyle, a principal analyst with Forrester Research, said Schwab was going to "ignite" the robo-adviser movement, but that there was room for competition among robo-advisers that expanded their horizons and homed in on specialized markets. "Robo-advisers that focus on different segments or take distinct strategies could absolutely survive," Mr. Doyle said. He mentioned Wealthfront in particular, the automated investment website that targets millennials and last week announced it had passed the $2 billion mark in assets under management. He also said traditional retail wealth and asset management firms will be in danger, though not immediately. Most investors still choose traditional advisers over robos. And some smaller robo companies that can't stand on their own may be acquired by bigger firms looking to get a foothold in the robo movement, he said.

Schwab is going after robo advisors with free portfolio management. Only winner will be consumers. https://t.co/HkOufYjxtB

— John Glasgow (@j_glasgow) March 8, 2015

Competing robo-advisers say they aren't worried about the brokerage firm's entrance into the market, however. Last fall when news broke that Schwab was working on its own online offering, self-proclaimed robo-advisers said it showed promise for the industry. Other companies, like TD Ameritrade, made no announcements about establishing its own robo-adviser, but said in October it would direct consumers to those that did offer an online investing platform. "This is not a winner take all," Mr. Doyle said. "The smart ones will sharpen their focus."