Schwab launches adviser-facing robo service

Schwab launches adviser-facing robo service
Institutional Intelligent Portfolios compels advisers to keep at least 4% cash allocation, offers platform for 10 bps.
JUN 25, 2015
Charles Schwab & Co. launched a second version of its automated investment service on Tuesday, this time a robo platform for advisers to implement within their own practices. It's been less than four months since the custodian debuted Schwab Intelligent Portfolios, the online investment platform targeting retail investors. The adviser-facing version, called Institutional Intelligent Portfolios, offers a customizable platform for advisers to create portfolios for their clients using more than 450 exchange-traded funds across 28 asset classes. Advisers with less than $100 million in assets under management with the custodian outside of the Institutional Intelligent Portfolios program will be charged 10 basis points to use the platform, while those that manage more than $100 million will be able to use the platform for free. Investors will not be charged account-service fees, trading commissions or custody fees. "This will change how things are done," said Bernie Clark, executive vice president of Schwab Advisor Services. "We built [Institutional Intelligent Portfolios] on top of what we built for individual clients and increased functionality. "Advisers are irreplaceable in the equation because of their planning and advice," he added. With Institutional Intelligent Portfolios, advisers will have the ability to access technology-enabled investment strategies for their clients, he said. The retail version of Schwab's robo has gained traction in the industry since its March launch. Within a month of that debut, it accumulated half a billion dollars in assets under management and as of Tuesday was managing about $2.9 billion. Mr. Clark said the institutional robo-adviser platform will elicit interest from across the industry, including from advisers wanting to manage assets for their high-net-worth clients' family members and friends as well. The platform will be customizable for advisers, who can use it to create their own investment strategies and add their own logos to the interface. Advisers will have to adhere to a 4% cash allocation requirement, however. It's less than retail Intelligent Portfolios customers must allocate to cash — which ranges from 6% at a minimum to a maximum of 30% cash — that caused a stir in March, when the free consumer version of the robo-adviser came out. Competitors such as Wealthfront and advisers argued that forcing investors to hold so much cash was a sneaky way to make money off of consumers that carried a missed-opportunity cost. Schwab stood by its requirement, saying cash was and always has been a good stabilizer. The competition is still critical of the custodian's robo endeavors. That said, other robo-advisers are hoping that a rising tide lifts all boats. Schwab's marketing muscle is sure to raise the profile of automated investment services. "Much like their initial launch had on our retail product, I'm confident that their entrance into the RIA [registered investment adviser] market will further accelerate the growth of our institutional product," said Nick Gavronsky, the head of product at Betterment Institutional, in an email. The number of digital offerings for advisers is quickly growing, giving advisers far more options than ever before. "It's a trend you'll see momentum behind," said Matt Fronczke, an analyst and engagement manager at kasina. "The core business model is to service consumers rather than advise, so you are seeing these robo services being provided as tools to more efficiently implement but also deliver services," he said.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.