billthecat wrote: ↑
Tue Oct 02, 2018 9:23 am
That's the Schwab Intelligent Advisory. The robo, Schwab Intelligent Portfolio, has no fees, nor trade commissions, but:
- some criticize the size of the cash portion, which folks say Schwab uses to lend out via Schwab Bank. It's counterbalanced by high yield bonds, but there's risk associated with that. But then again maybe that risk is mitigated from the large cash portion!
- if you want the cash to be that portion anyway, as an emergency fund, you can't withdraw just the cash and avoid selling securities. If you withdraw the cash, say during a downturn, it will rebalance to maintain the cash portion.
- some of the funds have higher ERs
. Not high, but higher than the index funds.
- there are a lot of allocations that are very small percentages which some folks say is unnecessarily complicated and does not affect the overall portfolio because it's small.
Thanks for the clarification and point out some of the pitfalls. Those are concerning enough I'd be cautious, especially if there are simpler (i.e. more passive) options available. Extricating yourself from a bunch of positions placed by a robot may be tedious and expensive, especially in a taxable account. It's at Schwab, so I'd give them the benefit of the doubt. If fees are truly zeroed out as is advertised by these new Fidelity funds, maybe a prospective heads up comparison between them is due. Maybe someone out there is already starting it, but everyone's situation is a little different (risk, taxes, exit strategy, etc.) so results will vary.
FYI, I'm suspect with these zero fee arrangements and how they're sustainable. No free lunch and they've got to pay their bills. When I went to the disclosures and totally misread (i.e. quick scaned) their Fees and Compensation section. It's clear as mud.
https://www.schwab.com/public/file/CMS- ... 0-2018.pdf
Fees and Compensation
The Program includes the following services: (i) Schwab’s Program
administration services, as well as trade execution, custody and related
services; and (ii) CSIA’s portfolio management services. Clients are not
charged and will not be charged a Program fee for these services.
In similar programs, clients might expect to pay an annual fee of
0.30% of client assets to reflect the value and cost of these services.
While clients are not charged a Program fee for services, due to retirement
accounts in the Program, for purposes of IRS rules, Schwab
makes a nominal calculation that fully offsets in the amount of 0.30%
the compensation its affiliates receive from ETF transactions in clients’
accounts. This includes advisory fees for managing Schwab
ETFs™ and fees earned for providing services to third-party ETFs
participating in the Schwab ETF OneSource™ program (“ETF
OneSource”), if CSIA selects them to include in Program accounts. If
this affiliate compensation ever exceeds 0.30% of client assets,
Schwab would refund the additional amount to client accounts or use
it to pay account administrative expenses. In all cases, the result is
that clients pay no Program fee.
And on one of the Intelligent Portfolio pages there's a blurb about "View important information about how we make money":
Schwab Intelligent Portfolios charges no advisory fee. Schwab affiliates do earn revenue from the underlying assets in Schwab Intelligent Portfolios accounts. This revenue comes from managing Schwab ETFs™ and providing services relating to certain third party ETFs that can be selected for the portfolio, and from the cash feature on the accounts. Revenue may also be received from the market centers where ETF trade orders are routed for execution.