Schwab Fixed Monthly Fee CFP Advice

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megabad
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Schwab Fixed Monthly Fee CFP Advice

Post by megabad » Fri Apr 05, 2019 2:33 pm

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Not sure if this info has been posted yet or not. Schwab announced recently that they are adding an additional optional service onto their Intelligent Portfolios--One and One advice with a CFP. The service is a fixed $30 after the mandatory initial consultation fee of $300. This appears to be a trend toward the "hybrid" advice model that many firms are discussing but it is being pursued through a fixed fee rather than a [direct] AUM fee (please see caveat above regarding Schwab's cash position and understand that Schwab fund's of course have associated ERs).

elainet7
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by elainet7 » Sat Apr 06, 2019 7:40 am

vanguard says it will do something similar at index fund levels
AUM advisers will be gone as obviously their fees are OUTRAGEOUS
great for spouses who have zero interest and knowledge about finance

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unclescrooge
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by unclescrooge » Sat Apr 06, 2019 8:54 am

I'm skeptical on the level of personal advice you can get for $30/mo.

That's equates to $360/year. If they said it was for a one time session, I'd believe them. But $30/mo doesn't seem feasible.

Assuming you want someone who is smart enough to make $80k/year (and not some entry level kid making $30k). The company will probably spend another $20k on benefits plus office space. And the company probably wants to make 20% profit. So the revenue that needs to be generated per employee is $120k.

So the employee needs 333 customers at $360/year to generate the needed $120k.

There are 1,980 working hours in a year. (Let's assume they get 2 weeks vacation plus another weeks worth of public holidays). So 49 weeks x 40 hours equals 1980 hours in a year.

Assuming 10% of time goes towards training and other HR/compliance related work. Another 10% is just lost productivity. That gives us an optimistic 80% of work hours.

So each employee can spend 4 hours and 45 mins on each customer per year.

This is sufficient for one in-depth session, or multiple generic sessions. Considering there is the overhead of reading prior meeting notes, and writing new notes for each meeting, multiple sessions are going to become more generic the higher the frequency.

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by gerntz » Sat Apr 06, 2019 9:21 am

Don't forget the point Zweig made in WSJ that Schwab requires at least 6% of assets be kept in their own bank savings account at 0.7% interest currently. Money markets paying 2.25%. Net, that 1.55% difference on 6% of assets costs equals about 0.10% loss of income. Schwab may recommend as high at 30% cash or a near 0.50% fee on the interest rate difference. Call that an added fee - if you think money markets are as save as bank savings accounts. If not, then you can discount the 0.10-0,50% some.

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by Rick Ferri » Sat Apr 06, 2019 9:23 am

The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.

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unclescrooge
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by unclescrooge » Sat Apr 06, 2019 9:25 am

gerntz wrote:
Sat Apr 06, 2019 9:21 am
Don't forget the point Zweig made in WSJ that Schwab requires at least 6% of assets be kept in their own bank savings account at 0.7% interest currently. Money markets paying 2.25%. Net, that 1.55% difference on 6% of assets costs equals about 0.10% loss of income. Schwab may recommend as high at 30% cash or a near 0.50% fee on the interest rate difference. Call that an added fee - if you think money markets are as save as bank savings accounts. If not, then you can discount the 0.10-0,50% some.
If it was $360 plus 10-50 bps, that would make sense.

Or it's a loss leader used to funnel money into their own funds.

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by anil686 » Sat Apr 06, 2019 9:27 am

I think the "quality" of advice will be less holistic in it's approach per se - but maybe not. I remember listening to the bogleheads podcast a couple of months ago with the guest from Betterment. They recently started advice that was specific question based - i.e. saving for college questions, portfolio analysis - each box to click had a different dollar amount that would be charged for the advice as a fee only session. I think Schwab is envisioning the same type of thing in that people are going to be requesting sessions with a specific purpose in mind and that $360 will probably cover the cost of those issues. It is important to keep in mind that the members on this forum are probably in the top 5% or higher of the population as a whole educated in aspects of investing and personal finance. What seems like "generic" or "not significantly actionable" advice here on the forum is likely going to be viewed by many others as relatively life changing and totally worth it. JMO though...

typical.investor
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by typical.investor » Sat Apr 06, 2019 9:30 am

gerntz wrote:
Sat Apr 06, 2019 9:21 am
Don't forget the point Zweig made in WSJ that Schwab requires at least 6% of assets be kept in their own bank savings account at 0.7% interest currently. Money markets paying 2.25%. Net, that 1.55% difference on 6% of assets costs equals about 0.10% loss of income. Schwab may recommend as high at 30% cash or a near 0.50% fee on the interest rate difference. Call that an added fee - if you think money markets are as save as bank savings accounts. If not, then you can discount the 0.10-0,50% some.
It's also interesting that Schwab's fixed income (including cash) outperformed all other robo's for the past three years.

I have yet to see a good analysis that considers the fixed income as whole and how it might perform in different environments (degrees of inflation and rate hikes).

I suspect Schwab's Porfolio might do better in an inflationary environment than Vanguard's. Given the degree of internationalization and how that seems to combat inflation maybe we will never see it much again in our lifetimes, and if we do I wonder if it might be across the board. Vanguard uses international bonds, but they have a little longer duration and won't help if inflation is seen globally.

Maybe we'll never see that, but the difference in inflation scenarios I think is maybe more significant than simply citing the cost of cash. There are also allocations to metal which I think is a drag too (and so won't use Schwab) but which may play a large benefit in inflation. Then the emerging market currency bonds. Just wow. No stomach here but there was an interesting thread showing how they have actually been worthwhile even given the occasional loss.

Then Schwab has other asset classes too which might be beneficial. For instance, the value tilt might also help with inflation. Growth loses as future excepted earnings that you pay for today would be worth less today with higher expected inflation.

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by Katietsu » Mon Apr 08, 2019 10:47 pm

unclescrooge wrote:
Sat Apr 06, 2019 8:54 am
I'm skeptical on the level of personal advice you can get for $30/mo.

That's equates to $360/year. If they said it was for a one time session, I'd believe them. But $30/mo doesn't seem feasible.

Assuming you want someone who is smart enough to make $80k/year (and not some entry level kid making $30k). The company will probably spend another $20k on benefits plus office space. And the company probably wants to make 20% profit. So the revenue that needs to be generated per employee is $120k.

So the employee needs 333 customers at $360/year to generate the needed $120k.

There are 1,980 working hours in a year. (Let's assume they get 2 weeks vacation plus another weeks worth of public holidays). So 49 weeks x 40 hours equals 1980 hours in a year.

Assuming 10% of time goes towards training and other HR/compliance related work. Another 10% is just lost productivity. That gives us an optimistic 80% of work hours.

So each employee can spend 4 hours and 45 mins on each customer per year.

This is sufficient for one in-depth session, or multiple generic sessions. Considering there is the overhead of reading prior meeting notes, and writing new notes for each meeting, multiple sessions are going to become more generic the higher the frequency.
I suspect >4 hours a year is way more time than most advisors locally around me spend per client. The typical pattern amongst my relatives/acquaintances seems to be a 1 hour meeting once a year. Maybe 15-30 minutes to prepare. And maybe another 1 hour cumulatively, at the most, during the year as questions come up or they want to perform an action. Many years there is no contact between the annual meetings. For this service, they are paying orders of magnitude more in fees than Schwab.

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unclescrooge
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by unclescrooge » Tue Apr 09, 2019 12:09 am

Katietsu wrote:
Mon Apr 08, 2019 10:47 pm
unclescrooge wrote:
Sat Apr 06, 2019 8:54 am
I'm skeptical on the level of personal advice you can get for $30/mo.

That's equates to $360/year. If they said it was for a one time session, I'd believe them. But $30/mo doesn't seem feasible.

Assuming you want someone who is smart enough to make $80k/year (and not some entry level kid making $30k). The company will probably spend another $20k on benefits plus office space. And the company probably wants to make 20% profit. So the revenue that needs to be generated per employee is $120k.

So the employee needs 333 customers at $360/year to generate the needed $120k.

There are 1,980 working hours in a year. (Let's assume they get 2 weeks vacation plus another weeks worth of public holidays). So 49 weeks x 40 hours equals 1980 hours in a year.

Assuming 10% of time goes towards training and other HR/compliance related work. Another 10% is just lost productivity. That gives us an optimistic 80% of work hours.

So each employee can spend 4 hours and 45 mins on each customer per year.

This is sufficient for one in-depth session, or multiple generic sessions. Considering there is the overhead of reading prior meeting notes, and writing new notes for each meeting, multiple sessions are going to become more generic the higher the frequency.
I suspect >4 hours a year is way more time than most advisors locally around me spend per client. The typical pattern amongst my relatives/acquaintances seems to be a 1 hour meeting once a year. Maybe 15-30 minutes to prepare. And maybe another 1 hour cumulatively, at the most, during the year as questions come up or they want to perform an action. Many years there is no contact between the annual meetings. For this service, they are paying orders of magnitude more in fees than Schwab.
So now a whole new breed of people can pay $30/month for the privilege of not talking to an advisor! :mrgreen:

Anyway, my math is totally wrong. Today I just read that VPAS has 100 CFPs and 11,000 clients. So apparently each CFP can easily handle 1,100 clients per year. So this is more in line with your reasoning that each client is worth 90 minutes/year.

If they don't have any questions for their advisor, who's fault is that?

confusedinvestor
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by confusedinvestor » Tue Apr 09, 2019 12:47 am

I've been using Schwab SIA since inception and I'm fairly happy. MoneyGuidePro access for $78/year is a steal.

elainet7
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by elainet7 » Tue Apr 09, 2019 7:27 am

Fee based advisers is here to stay
paying AUM fees yearly is just silly

Truist
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by Truist » Mon Oct 14, 2019 1:54 am

confusedinvestor wrote:
Tue Apr 09, 2019 12:47 am
I've been using Schwab SIA since inception and I'm fairly happy. MoneyGuidePro access for $78/year is a steal.
Hey - May I ask how you went about getting MoneyGuidePro access for $78/year, please?

aristotelian
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by aristotelian » Mon Oct 14, 2019 6:07 am

gerntz wrote:
Sat Apr 06, 2019 9:21 am
Don't forget the point Zweig made in WSJ that Schwab requires at least 6% of assets be kept in their own bank savings account at 0.7% interest currently. Money markets paying 2.25%. Net, that 1.55% difference on 6% of assets costs equals about 0.10% loss of income. Schwab may recommend as high at 30% cash or a near 0.50% fee on the interest rate difference. Call that an added fee - if you think money markets are as save as bank savings accounts. If not, then you can discount the 0.10-0,50% some.
This is the key to the business model and the main reason for skepticism. I would not be surprised if the delta between market money market rates and Schwab's cash instruments comes close to the .3% Vanguard charges for PAS, but Schwab is more clever at hiding it.

typical.investor
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by typical.investor » Mon Oct 14, 2019 6:24 am

aristotelian wrote:
Mon Oct 14, 2019 6:07 am
gerntz wrote:
Sat Apr 06, 2019 9:21 am
Don't forget the point Zweig made in WSJ that Schwab requires at least 6% of assets be kept in their own bank savings account at 0.7% interest currently. Money markets paying 2.25%. Net, that 1.55% difference on 6% of assets costs equals about 0.10% loss of income. Schwab may recommend as high at 30% cash or a near 0.50% fee on the interest rate difference. Call that an added fee - if you think money markets are as save as bank savings accounts. If not, then you can discount the 0.10-0,50% some.
This is the key to the business model and the main reason for skepticism. I would not be surprised if the delta between market money market rates and Schwab's cash instruments comes close to the .3% Vanguard charges for PAS, but Schwab is more clever at hiding it.
To be honest, it really hasn’t cost anything. Schwab has the best returns on the fixed income side of any robo advisor over three years which is how long robo shave been tracked.

What has made a difference is that Schwab equities are nearly market cap weighting for US/international. Not sure how that changes for each customer.

Also, Schwab includes value type funds and a small size tilt.

International, value, and small size haven’t done well recently.

Time will tell, but you can’t really analyze the cash at Schwab in isolation. You have to look at the portfolio. The cash allocation is included as part of their fixed income that has done well.

Anyway, if inflation picks up globally, I think I’d prefer Schwab to Vanguard’s PAS.

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by afan » Mon Oct 14, 2019 8:33 am

Both PAS and the Schwab product are designed to gather assets with the attendant fees. Vanguard, being Vanguard, is upfront about the cost. Schwab hides some of the cost in the cash allocation. This encourages people to simply look at the stated fee and conclude Schwab is cheaper.

It makes it appear that there is no AUM component when in fact one is paying a disguised AUM to Schwab.

A true fee-for-advice model would have no AUM component. The vendor could set the price based on how much money the client had invested with them. $300/hour if you had less than $X with them, $250/hour if you had $X-Y, $200/hour for amounts >Y. You could buy an overall plan, a recommended asset allocation, advice on specific funds, answers to non-investing questions and so forth. If you want an annual hours meeting, fine just pay for it. If you go a year without advice then you pay nothing.

My occasional tests of Vanguard's Ask A CFP has not left me impressed that the advice would be worth paying for. Much more comprehensive and sophisticated information available for free from BH. There may be people for whom the limited advice is useful. No reason to pay AUM to get it.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by aristotelian » Mon Oct 14, 2019 8:46 am

typical.investor wrote:
Mon Oct 14, 2019 6:24 am
aristotelian wrote:
Mon Oct 14, 2019 6:07 am
This is the key to the business model and the main reason for skepticism. I would not be surprised if the delta between market money market rates and Schwab's cash instruments comes close to the .3% Vanguard charges for PAS, but Schwab is more clever at hiding it.
To be honest, it really hasn’t cost anything. Schwab has the best returns on the fixed income side of any robo advisor over three years which is how long robo shave been tracked.

What has made a difference is that Schwab equities are nearly market cap weighting for US/international. Not sure how that changes for each customer.

Also, Schwab includes value type funds and a small size tilt.

International, value, and small size haven’t done well recently.

Time will tell, but you can’t really analyze the cash at Schwab in isolation. You have to look at the portfolio. The cash allocation is included as part of their fixed income that has done well.

Anyway, if inflation picks up globally, I think I’d prefer Schwab to Vanguard’s PAS.
Their allocation and performance are irrelevant if you are just looking at the cost of the advisory service per se. The holdings should be compared apples to apples and I have no doubt that they hold up.

I disagree that you look at cash returns with fixed income since one could easily replicate the fixed income side without the cash.

The robo advisory does not put you in Schwab's money market funds (which are competitive with Vanugard's) but rather their Sweep Program which is currently yielding 0.55%, well below market rates.

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by Nate79 » Mon Oct 14, 2019 10:18 am

Schwab offsets cash with higher yielding, higher risk bonds to result in a no cost robo service with add on cost for advisors that results in a better fixed income return than Vanguard. They are upfront about this as well as upfront about their using that cash to offset the cost of the program. They are not hiding anything just require a little bit of reading and some critical thinking skills.

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by afan » Mon Oct 14, 2019 10:37 am

Nate79 wrote:
Mon Oct 14, 2019 10:18 am
Schwab offsets cash with higher yielding, higher risk bonds to result in a no cost robo service...
Good point about thinking skills.
Except that one could use the same strategy with a higher paying money market fund. It is clearly NOT no cost.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by aristotelian » Mon Oct 14, 2019 10:50 am

Nate79 wrote:
Mon Oct 14, 2019 10:18 am
Schwab offsets cash with higher yielding, higher risk bonds to result in a no cost robo service with add on cost for advisors that results in a better fixed income return than Vanguard. They are upfront about this as well as upfront about their using that cash to offset the cost of the program. They are not hiding anything just require a little bit of reading and some critical thinking skills.
Yes, it is all there in the fine print, but it is fine print. I don't like that they say "cash is a key component of an investment portfolio" when that is very much debatable. I am also not clear how exactly it works but according to their disclosure document, the Intelligent Portfolio may recommend up to 30% cash. It does seem like they are trying to push people toward cash. https://www.schwab.com/public/file/SIP- ... cle_inline

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by typical.investor » Mon Oct 14, 2019 6:58 pm

aristotelian wrote:
Mon Oct 14, 2019 10:50 am
Nate79 wrote:
Mon Oct 14, 2019 10:18 am
Schwab offsets cash with higher yielding, higher risk bonds to result in a no cost robo service with add on cost for advisors that results in a better fixed income return than Vanguard. They are upfront about this as well as upfront about their using that cash to offset the cost of the program. They are not hiding anything just require a little bit of reading and some critical thinking skills.
Yes, it is all there in the fine print, but it is fine print.
Um, yeah it’s also prominently located on their main landing page in big print. I’d say the information is deliberately positioned to be easily seen.

Ok fine, you don’t like zero duration fixed income. It’s part of a barbell approach though.
Last edited by typical.investor on Mon Oct 14, 2019 7:02 pm, edited 1 time in total.

aristotelian
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Re: Schwab Fixed Monthly Fee CFP Advice

Post by aristotelian » Mon Oct 14, 2019 7:02 pm

typical.investor wrote:
Mon Oct 14, 2019 6:58 pm
aristotelian wrote:
Mon Oct 14, 2019 10:50 am

Yes, it is all there in the fine print, but it is fine print.
Um, yeah it’s also on their main landing page in big print.

Ok fine, you don’t like zero duration fixed income. It’s part of a barbell approach though.
I don't like earning 0.55% on up to 30% of my portfolio, no I do not.

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by afan » Wed Oct 16, 2019 10:04 am

There are two issues, keep them separate

1. Is it appropriate to hold such high allocations in cash? Most people would say no. It is possible that there may be certain situations for certain clients when this is reasonable. Holding money for a down payment, for example. As a default allocation for everyone it is hard to justify. The only rationale is a way for Schwab to collect disguised AUM fees.

2. For whatever level of cash one might want, for whatever reason, there is no logic in choosing a low interest account when equally safe higher Interest options are available. Doing so is just throwing away money.

An advisor who puts clients in a high cash position in low interest accounts is giving bad service. Advisors who do this because they make more profit is not acting in the clients' interest.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by Jack FFR1846 » Wed Oct 16, 2019 10:21 am

I'm wondering if Schwab puts clients into higher EF ETFs. I forget their robo advisor program name, but did look at it and the ETFs they used could easily be replaced with Schwab lowest cost ones. Was it Intelligent Portfolio? I did look through it and thought that even if I had an interest in them managing my account, I wouldn't want them using higher priced funds.

Will they end up doing what PAS does? Meet via skype, get your age, plug that in and get a non-negotiable listing of funds that are essentially target date.....but disguised by breaking down funds....like instead of simply VTI, getting 3 funds that would make up VTI and separately listing them?

I'll stick with DIY.
Bogle: Smart Beta is stupid

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Re: Schwab Fixed Monthly Fee CFP Advice

Post by chw » Wed Oct 16, 2019 10:33 am

Long time Schwab client here. While I don't use this service, I have nothing but accolades for the level of Schwab's customer support team, as well as the assistance I have received from my assigned Client Consultant.

Some have mentioned they doubt the quality of advice that may be provided by this inexpensive service. I've actually had 2 free holistic/in depth financial reviews that involved several conference calls with a Schwab CFP. I found the level of review and advice to be comparable if not better than the review done by a 1% advisor I had used for a short time many years ago (who actually introduced me to Schwab as a custodian).

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