Schwab to compete with Betterment and Wealthfront?

Charles Schwab will introduce “Schwab Intelligent Portfolios” soon. They tout it as a revolutionary technology with the following features. “It will analyze the goals and risk tolerance you specify to generate a diversified portfolio of ETFs. It will automatically rebalance your portfolio to help you stay on track. It can even work to reduce your tax bill through tax-loss harvesting. It is essentially your personal investing algorithm that works to manage your portfolio. And it does it automatically without charging advisory fees, commissions, or account service fees. Period. Or rather, exclamation.”

Sound familiar? Sounds pretty much like Betterment and Wealthfront. If is it similar to Betterment and Wealthfront, it will be a tough competitor for both. Particularly if there aren’t any fees or commissions. This will be a significant differentiator. Also investors would likely be more comfortable with the more well-known Schwab rather than a couple of new companies.

I suppose Schwab will feature their own ETFs. But that will be fine. Fortunately, I have a small taxable account with Schwab and will be able to test this new service when it is available.

My primary IRA is with Fidelity, so I contacted them to see if they had any plans like this. They directed me to their current advisory services. These are fairly typical, a tiered approach based on the size of the assets in the account. There are varying amounts of human oversight and fees. The initial fees are about 1% a year, close to Personal Capital’s. I suspect a fair amount of my IRA will migrate somewhere else later this year.

I plan on updating the test accounts this weekend and describing how they handle dividends next. Follow me on twitter @billlanke and I will notify you when I make my next posts.