Charles Schwab has finally flipped the on switch for its robo product for advisors -- now the hard sell begins.

Schwab must convince the 7,000 advisors who custody with the firm that its new Institutional Intelligent Portfolios automated investment management service is worth implementing.

Some RIAs said the digital wealth management product doesn’t suit their core customers who require higher-touch services, but could be make a good fit for clients with smaller accounts.

But others questioned Schwab’s requirement that portfolios maintain a minimum of 4% in cash, and said they needed more time to dig into the product’s features before making a decision.

“I have not considered using automated portfolios for my clients, however there is always an exception,” says Erika Safran, principal at New York-based Safran Wealth Advisors. “If you have prospective clients who may not fit your business model, this might be a vehicle to address the investment aspect of the relationship.”

Schwab’s professional robo product, launched Tuesday, allows advisors to create a set of portfolios from more than 450 ETFs across 28 asset classes.

A client fills out a questionnaire regarding investment goals and risk tolerance, and he or she is mapped to one of the advisor-designed portfolios.

Advisors can then have a final review of the client’s profile and portfolio assignment, and make adjustments before approving it.

There is a ten basis point platform fee for RIAs with less than $100 million in AUM custodied with Schwab. Advisors who maintain more than $100 million in AUM at Schwab pay no fee.


Among the potential advantages of an automated investment platform for advisors: the opportunity to “better serve existing smaller relationships or sub-accounts belonging to core clients more cost-effectively” and the ability “to create an offer for serving new clients who might previously have been turned away,” Schwab wrote in its marketing materials sent to RIAs.

Scott Toomasson, client relationship manager at Private Capital Management Associates, a San Mateo, Calif.-based RIA with $85 million under management, says his firm, for now, was not planning to roll out Institutional Intelligent Portfolios, though he did see how it might be appealing for younger investors.

“Our clients are set in the way we are doing things,” Toomasson says. “It could be more appealing for 20 or 30-somethings who are used to Internet-based onboarding.”

If Schwab “expanded their universe of ETFs, it might help,” he adds.

Julie Won, a partner at Hanson & Doremus Investment Management, an RIA with offices in Burlington, Vt., and Palo Alto, Calif., says having a platform that required a “high cash balance,” of 4%, may not be right for everybody.

The cash is held in Schwab Bank, which is one way Schwab earns money from its wealth management platform.

“Obviously Schwab needs to get paid,” Won says. The cash requirement “is not necessarily a bad thing, but in some cases it might not be good for some investors.”

Even so, Won says she wants to learn more about Institutional Intelligent Portfolios.

“It could make sense for clients with smaller account sizes of under $60,000 or $70,000,” she says. “It is largely automated, low fee and low turn.”


Having listened in on Schwab's call as it announced its robo for advisors, Tim Hatton, president of Hatton Consulting in Phoenix, Ariz., says he came away with a single question.

"It's an excellent tool; what we are all trying to figure out is how to implement it into our offerings," he says.

Hatton adds that he saw the value in having it as part of his business.

"We do everything a robo does," he says. "But I do believe if the platform can save us a few steps, it’s a very smart thing to potentially do. I would be really surprised if we didn’t implement it in a significant way."

Phyllis Furman, a financial writer in New York, has contributed to and the New York Daily News.

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