A Fast Start for Schwab's Robo Adviser

Charles Schwab’s Intelligent Portfolios, the company’s robo adviser business, is off to a stellar start having amassed more than $5 billion in assets in its first year of operation.

“Charles Schwab Corp’s automated investment service grew about 29 percent to $5.3 billion at the end of the fourth-quarter, rising despite volatile U.S. financial markets, a spokeswoman said Wednesday,” reports Trevor Hunnicutt for Reuters. “The San Francisco-based company previously reported the program’s total assets stood at $4.1 billion, as of Sept. 30, the spokeswoman, Alison Wertheim, said.”

Schwab’s Intelligent Portfolios service has benefited from bringing more of a personal touch to the robo advisory business. While most robo-advisory business provide a clear cut-and-dried formula for people to ride the markets, there are times when talking through personal circumstances may benefit investment decisions.

For instance, during the height of market volatility from August 21 through August 28, there was a 51% increase in the number of client calls, there was a 66% increase in the number of client online chats held and the most common client questions were about the markets in general and how the portfolios work during these periods of volatility, in particular regarding automatic rebalancing and tax loss harvesting. Schwab Intelligent Portfolios provide a suitable alternative to actively managed strategies. [Schwab Puts a Personal Touch on Intelligent Portfolio Construction]

Schwab Intelligent Portfolios feature exposure to the firm’s fundamentally-weighted ETFs, or funds that weight holdings by company sized based on adjusted sales, operating cash flow, and dividends plus buybacks.

Those ETFs include the Schwab Fundamental U.S. Small Company ETF (NYSEArca: FNDA) tracks the bottom companies that weight below 87.5% from the Russell 3000 Index. The Schwab Fundamental International Large Company ETF (NYSEArca: FNDF) includes companies with weights above 87.5% of the Russell Developed ex-U.S. Index. The Schwab Fundamental International Small Company ETF (NYSEArca: FNDC) takes companies with weights below 87.5% of the Russell Developed ex-U.S. Index. Lastly, the Schwab Fundamental Emerging Markets Large Company ETF (FNDE) holds companies with weights above 87.5% of the Russell Emerging Markets Index.

“Schwab makes Intelligent Portfolios available to clients directly and through the firm’s affiliated third-party financial advisers,” according to Reuters.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.