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Schwab tells the SEC its robo-advisor has a 30 basis-point fee and big-time cash allocations held by Schwab Bank

The Schwab Intelligent Portfolios ADV says as much as 30% of clients assets are being sent to Schwab Bank

Author Lisa Shidler February 18, 2015 at 7:59 PM
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Naureen Hassan's revenue weapons for robo-accounts include one howitzer.




February 18, 2015 — 10:12 PM

Nicely done, Lisa. Thank you for getting behind the curtain and sharing with the world.

Dave Ross

Dave Ross

February 19, 2015 — 4:58 PM

Fantastic overview of Schwab offering. A great example of how companies don’t get it. Clients want something that is simple clear and precise. This is nothing like that. It will be interesting to see exactly how they promote this to the public in an understandable format and how vulnerable they will be to advisors mockery.



February 19, 2015 — 7:16 PM

I hope they are kidding with this product offering, 30% in cash? 5 pages of fee disclosures, really??? It is time for the Robo 2.0 to take them out-


Schwab Spokesperson

Schwab Spokesperson

February 20, 2015 — 2:52 AM

A 43-year-old who signs up for Schwab Intelligent Portfolios saving for a college education for his child and needs the money in just a few years — how much cash do you think he should have? We say about 30%. Sounds perfectly reasonable, wouldn’t you agree? #stoptwistingthefacts

Schwab Spokesperson

Schwab Spokesperson

February 20, 2015 — 3:20 AM

30% is the extreme end of a continuum, not the norm. Most long-term investors will have a much lower cash allocation . . . as they should. But some cash is always an important component of a healthy portfolio as it provides some insurance against volatility and the impact market declines. Most investors seek return and some risk management.



February 20, 2015 — 2:09 PM

This is unfair competition to Betterment and Wealthfront who do not own banks plus it deceptive to the investing public to say the least. I’d rather keep the cash portion of my portfolio in Capital One 360 at 0.8% – why would I want Schwab to allocate any of my portfolio to cash at 0.1% if they will not have all my assets. It’s unlikely that any investor is going to turn over all their investments and cash to Schwab. Schwab is going to give robo investing a black with this one.

The SEC should kill this deal, if not them, the FTC.



February 22, 2015 — 12:03 PM

Wait, is it up to 0.30% (30 basis points) held in cash or 30.00% (3000 basis points) held in cash? The article is not clear at all.

brooke southall

brooke southall

February 22, 2015 — 7:39 PM

30 basis point fee and up to 30% cash allocation…two different things



February 22, 2015 — 8:10 PM

Schwab is the best at speaking transparency. Once you did in, you can see it’s anything but. That’s what attorneys are there for: To protect at all costs, a brand message of transparency. Until you read the fine print. Excellent article Lisa. Smarten up RIAs. They’ll be exciting, more transparent robos coming that will deviate from efficient market theory misleading dogma. Be patient.

Jack Waymire

Jack Waymire

February 25, 2015 — 5:41 PM

Schwab’s offering may test the ethics and business practices of RIAs who have to explain “free” robo services to their clients.

Peter Mafteiu

Peter Mafteiu

February 25, 2015 — 11:09 PM

Interesting that the Form ADV Part 2 A is required to be written in plain English. Here, it took an experienced reporter a lot of time to understand what the Schwab Robo ADV says. Simply, this is counter intuitive to any prospective client of the Schwab Robo IA.

Seems to me that the SEC can and should require a simple explanation of how the funds are allocated and ALL the direct and indirect conflicts of interest – including the payment by ETFs to be blessed to be on the platform. This includes the amount ETF’s pay to be put on in and on the platform. Seems like gross profit to me (net of legal fees).

Payment to play or participate is not the same as due diligence no matter how you wrap it up.

Overall interesting. Trust me and Schwab – the amount of money Schwab will make with assets in the affiliate AND using Schwab’s own ETFs could boggle the mind!

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