- In a sign of the fierce competition among wealth managers offering low-cost advice, Charles Schwab said Thursday it launched a new digital tool that automates the financial planning process for users.
- The new platform resembles approaches from robo-advisers Betterment and Wealthfront, which evaluate users’ financial situations and create plans for them, and legacy competitors like Fidelity.
- The tool comes just over a year after it put a subscription-based twist on its automated investing product.
- Visit Business Insider’s homepage for more stories.
Late last year, brokerages and wealth management firms scrambled to eliminate the cost of do-it-yourself trading so they could stay relevant and compete with the cult of Robinhood.
Now that the commission-free trading battle has faded, a different front in the brokerage wars is playing out across the industry: firms have to compete aggressively on the price of financial planning advice.
On Thursday, wealth and brokerage powerhouse Charles Schwab launched a new digital tool that automates users’ financial and retirement planning process, complete with a big-picture evaluation of risk appetite and goals. Anyone with a Schwab brokerage account can sign up, and there is no minimum to use the new product, Schwab Plan.
The approach should sound familiar. Firms across the industry are coming up with sleek, low-barrier-to-entry digital approaches to help people plan out their financial lives so they can draw in a new set of digitally savvy customers.
Schwab Plan is distinct from the firm’s robo-adviser it introduced in 2015 and re-branded as Intelligent Portfolios Premium with a subscription-based twist last year. The robo-adviser has fees, and an account minimum.
“The client type really is about preferring a digital methodology as opposed to someone who wants to meet with or speak with someone in person, and is comfortable self-guiding through that experience,” said Cynthia Loh, Schwab’s vice president of digital advice, in an interview on Wednesday.
“That’s how we think about the target,” she said when asked about the client Schwab had in mind when building out Schwab Plan. “If you wanted more sophisticated planning, or to meet with someone one-on-one, we would probably recommend one of our other financial planning offers.”
Reuters
Loh, who joined San Francisco-based Schwab in 2017 from the robo-adviser Betterment, oversees the client experience for the Intelligent Portfolios lineup and was part of spearheading its new planning tool.
Schwab worked with the Envestnet-owned wealth management software firm MoneyGuidePro to launch the new tool, which sets users up with a dashboard and can pull together accounts held away from Schwab.
The firm does not expect to generate revenue directly from the new tool, which comes at no cost to self-directed users. Schwab sees the platform as a way to level the playing field for users who want to start planning out their long-term financial goals, like saving for retirement, and can direct customers to its other products like the Intelligent Portfolios suite.
Schwab, set to close on its $26 billion TD Ameritrade acquisition by year-end, oversaw $4.3 trillion in client assets through July 31 and reported 14.2 million active brokerage accounts as of August 14.
Competition for low-cost financial planning
Charles Schwab executives have acknowledged the rivalry for new customers in the self-directed and hybrid human-and-digital advice spheres is fierce — not only from establishment names, but new entrants, too.
At an investor presentation in February, management said the intensity of incentives from competitors to open new accounts, like cash, was “higher than ever before.”
“Unfortunately, this approach works,” Schwab CEO Walt Bettinger said at the time. “And so therefore, organizations like ours, despite finding it a somewhat distasteful approach, recognize that we have to be willing to match these types of things or there’s a certain percentage of clients who will move on.”
One of Schwab’s biggest rivals, Boston-based Fidelity Investments, last month introduced a new, free app geared toward “young adults” and their financial goals, allowing users to track their process and time horizon.
Fidelity also said would offer $5 sign-up and referral bonuses, and introduce subscription-style pricing for its four-year-old robo-adviser, called Fidelity Go.
Meanwhile Betterment and Wealthfront, which both launched around a decade ago, before legacy firms developed their own robo-advice offerings, have similar features for users to plan out their financial lives and track progress.
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