Schwab Intelligent Portfolios Review: Robo-Advisor for Large Balances

For those who don't want to play an active role in their investments and also don't want to hire a financial advisor, Schwab offers the Schwab Intelligent Portfolios automated investing, or robo-advisor platform. Charles Schwab is one of the largest brokerage firms in the world, and it offers a variety of investment, wealth management, and other financial services. In this Schwab Intelligent Portfolios review, we'll take a deeper dive and look at the pros and cons of this robo-advisor platform.

This robo-advisor is a good fit for: Hands-off investors who don't want to make day-to-day investment decisions.

Top perks

No management fee

As a company, one of Charles Schwab's main goals is to bring low-cost investment solutions to the masses, and that is certainly reflected in Schwab Intelligent Portfolios. Investors are not charged any advisory fees, although there are small ongoing management fees for the underlying investment options. These fees (expense ratios) range from 0.00% to 0.65% of invested assets, although most of the investment funds Schwab uses in client portfolios are on the lower end of this spectrum. Schwab Intelligent Portfolios' overall weighted average ETF expense ratios range from 0.02%-0.19%.

Automatic rebalancing

Schwab Intelligent Portfolios offers automatic rebalancing to help maintain clients' ideal asset allocations.

Tax-loss harvesting

The platform also offers tax-loss harvesting, which can be a big perk for clients with larger account balances or who are in the higher tax brackets. In a nutshell, tax-loss harvesting is a strategy in which investments that have declined in value are strategically sold to help offset taxable capital gains from other investments.

Income strategies

Schwab offers its robo-advisor clients access to its Schwab Intelligent Portfolios feature at no additional cost. This allows retirees and other income-seeking investors to generate a monthly "paycheck" from their account, and provides guidance on topics like safe withdrawal rates, required minimum distribution (RMD) guidance for traditional IRAs, and more.

Account types

Schwab Intelligent Portfolios offers a wide variety of account types. The platform supports standard brokerage accounts, IRAs (traditional, Roth, and rollover), SEP-IRAs, SIMPLE IRAs, trusts, UGMA/UTMA accounts, and more.

What could be improved

Minimum deposit

One big negative factor that's likely to turn off many potential customers is the platform's requirement of a $5,000 minimum initial deposit. This is by far the highest required minimum among our favorite robo-advisors, and could make Schwab Intelligent Portfolios inaccessible for new and younger investors.

Access to human advisors

There's also no access to human financial advisors unless clients pay for the premium version, which we'll discuss later on.

Schwab Intelligent Portfolios lets investors put their money to work in a portfolio of exchange-traded funds, or ETFs. These allow for diversified exposure to stocks, bonds, and other asset classes, and with a bare minimum of expense. Schwab uses just over 50 different ETFs in its automated portfolios, many of which are Schwab's own funds.

Basically, investors complete a short questionnaire that helps Schwab determine their risk tolerance and investment objectives, and the robo-advisor does the rest.

Services offered

When it comes to services and features, Schwab is among the best robo-advisors.

Schwab Intelligent Portfolios monitors client accounts daily and automatically rebalances as needed. In other words, if your initial questionnaire determines that you should have 50% of your money in stock-based ETFs and another 50% in bond-based ETFs, the platform will periodically buy and sell investments on your behalf to maintain this desired allocation.

Schwab is also one of the few robo-advisors that offer free and automatic tax-loss harvesting to clients. This is only offered to clients with $50,000 or more of invested assets, but can be a major benefit to investors with large accounts or who are in high tax brackets.

In addition, Schwab's Intelligent Income feature is a big differentiator, especially for clients who are at or near retirement age. This helps clients set up a recurring monthly withdrawal and automatically makes these withdrawals in the most tax-friendly manner possible. It also provides guidance on how much a client can safely withdraw and how much they need to withdraw from retirement accounts to satisfy required minimum distribution (RMD) rules.

Pricing and fees

As mentioned, Schwab Intelligent Portfolios is among the cheapest robo-advisor platforms. With no account management fees and minimal investment expenses, investors get to keep more of their returns than they would with some of its rivals.

It's worth noting that Schwab also has a premium version of its robo-advisor platform, known as Schwab Intelligent Portfolios Premium, which does have management fees. Premium clients pay an initial financial planning fee of $300 as well as an ongoing $30 monthly advisory fee, and there's a minimum balance of $25,000. Compared to the costs of hiring a financial planner, this is certainly a competitive offer. But it is also more expensive than the premium offerings from other leading robo-advisors.

However, you get what you pay for. Schwab Intelligent Portfolios Premium clients get unlimited one-on-one guidance from a Certified Financial Planner™, a customized financial plan to help meet their goals (such as buying a house or saving for college), and access to online financial planning tools. Premium clients can also link accounts from other financial institutions so they can view their entire financial picture in one place.

There are two types of support that robo-advisor clients could need -- investment advice and help with technical issues. So let's take a look at how Schwab Intelligent Portfolios stacks up.

When it comes to investment advice, it isn't the best. Unless clients pay for the company's premium service, which costs $300 upfront plus $30 per month, there's no access to human financial advisors.

On the other hand, technical support is an area where Schwab Intelligent Portfolios shines. Customers have access to 24/7 U.S.-based support from real-live people.

• You have more than $5,000 to invest.
• You don't care about getting financial advice from a human.
• You have more than $50,000 to invest and want tax-loss harvesting strategies to minimize your taxable investment income.
• You're at or near retirement age and want to automate your investment account withdrawals in an efficient manner.

At The Motley Fool Ascent, brokerages are rated on a scale of one to five stars. We primarily focus on fees, available assets, and account types; however, we also take into account features like research, education, tax-loss harvesting, and highly rated mobile apps. Our highest-rated brokerages generally include low fees, a diverse range of assets and account types, and useful platform features.

See our full methodology here: Ratings Methodology