Schwab robo advisor adds $1B in client assets

Charles Schwab’s automated investment platform topped $1 billion in net new assets in the past three months, according to the firm, due at least in part to a switch to a subscription fee model.

Since introducing a flat-fee model at the end of March, the Intelligent Portfolios Premium service has seen a 25% rise in account openings and a 37% boost in new-to-Schwab household enrollments, according to a statement. The average enrolled household assets jumped 40% over the same time period.

Overall, client assets managed by Schwab's digital advisory solutions rose 23% year-over-year, totaling $41 billion.

Schwab Intelligent Portfolios Premium changed its pricing model from a traditional percent of investable assets to a flat fee structure of $300 for a financial plan and $30 per month for ongoing service. The discount brokerage said the switch would help cater to a younger client base.

The move to a subscription-based financial planning model came as a direct result of feedback from clients about the appeal of the pricing approach, said
Schwab’s vice president of digital advice and innovation Cynthia Loh, in a statement.

“Today’s consumers expect simplicity, transparency and value — and how they invest should be no different,” she says.

Clients need a minimum of $25,000 in investable assets to use the service.

Subscription models have proven successful for other companies such as online retailers like Amazon, Dollar Shave Club and Blue Apron helping them become three of the top five most popular retail sites last year, with net sales of upward of $2.6 billion, according to research from McKinsey & Company.

The wealth management industry is changing rapidly, says Aite Group research director Alois Pirker in the statement. Consumers expect services tailored to their needs and the ability to pay as they go.

Schwab Intelligent Portfolios Premium was created to service clients in search of a combination of automated portfolio management and comprehensive financial planning.

“We’ve seen many new clients sign up who knew they needed help with financial planning but hadn’t found an advisory model that fit them — either because they prefer a more digital approach, are cost-conscious, or find traditional planning services overly complex,” Loh says.

Clients using Schwab’s service represent a wide range of ages and asset levels. According to McKinsey, the subscription e-commerce market has grown by more than 100% per year over the past five years, subscribers are most likely to be 25 to 44 years old and have incomes from $50,000 to $100,000.