By Julie Verhage (Bloomberg)
Charles Schwab Corp., the low-cost investing pioneer that now handles more than $3.5 trillion in assets, is switching to a subscription-based financial planning option to its digital advisory service that offers more hands-on help, the company said Thursday.
“We are making this change on behalf of our clients to be simpler and more transparent, but we’re also paying attention to the broader landscape,’’ Cynthia Loh, vice president of digital advice at San Francisco-based Schwab, said in an interview. “Customers are used to engaging with subscription services.’’
Schwab Intelligent Advisory, which includes unlimited guidance from a certified financial planner and an in-depth financial plan, will charge new customers an upfront fee of $300 and a flat $30 a month starting on April 1, instead of the current 0.28 percent of assets. The hybrid robo service is being renamed Schwab Intelligent Portfolios Premium.
Current users won’t have to pay the $300 fee, and they’ll be transitioned to the new pricing model as early as Thursday, but only once they have enough assets to make it more cost-efficient for them, at around the $125,000 level. The free version of the service, Schwab Intelligent Portfolios, which automatically builds and rebalances exchange-traded fund portfolios as well as offering more limited guidance, will continue charging no advisory fee.
*Tax‐loss harvesting is available for clients with invested assets of $50,000 or more in their account. Clients must choose to activate this feature.
The subscription model has become increasingly popular in the technology industry. Netflix Inc., Amazon.com Inc. and Apple have many millions of users, so even small monthly fees can quickly add up to significant revenue. Schwab has 300,000 accounts and $37 billion across its digital offerings, including the robo-adviser service, accounting for a small portion of its assets.
“There aren’t many firms that have tens of millions of customers,” said Devin Ryan, an analyst with JMP Securities LLC. “That being said, for certain parts of the industry that are maybe tech-driven, incredibly scalable and could potential service millions of people, absolutely I could see there being value to a subscription model.’’
