Market Overview

Getting To Know Charles Schwab's New Robo-Pal

Getting To Know Charles Schwab's New Robo-Pal

Last week, Charles Schwab Corp (NYSE: SCHW) launched an innovative twist on traditional investment managers.

According to the press release, Schwab Intelligent Portfolios –- Charles Schwab's new digital investment manager ("robo-advisor") -– uses "software to create and rebalance customized, diversified portfolios for investors at much lower fees than traditional asset management, life insurance, and wealth management firms charge."

While not the first of its type, Schwab reports that its robo-advisor introduces a more intelligent portfolio advisor, which has the potential to change the industry on a global scale.

So, What Does The Robo-Pal Address?

1. Unmet Needs: Unlike traditional investment managers, digital managers "open up portfolio management to those who couldn't previously get it because of high investment minimums – as well as those who didn't want portfolio management at fees of 1% or more of their invested assets every year."

Related Link: BP Analytics Bridges The Gap Between Human And Robo-Advisors

2. Playing In A New Ballpark: The digital aspect has transformed the market so substantially that not only is there room for innovations such as that provided by Schwab, but it is such a "fast-expanding market that can support multiple winners focusing on different strategies and investor segments."

What Schwab Brings To The Market

Price: Schwab Intelligent Portfolios are free. Due in part to allocations to cash, there is no annual fee associated with Schwab's robo-advisor. The funding has come from underlying ETFs, and Schwab can profit because of their bank and the difference that comes from the rate Schwab pays out to investors versus earnings on cash.

Customer Support: Schwab provides access to 24/7/365 customer service via Internet chat or phone calls. Unlike others in the sector, Schwab has the workforce in place to support such an accessible service. Schwab EVP Naureen Hassan stated, "We already had the staff—we didn't need to hire."

Dedication: Self-proclaimed as "Schwab's seriousness of purpose," Schwab has not only devoted countless man-hours and hundreds of employees working on perfecting the project, but the focus has been consumer-centric and devoted toward substantiating future possibilities.

Focus On Growth: Going forward, Schwab plans to introduce newer versions of the robo-advisor, which will have the ability to be private-labeled by RIAs.

In its own words, Schwab challenges the rest of the market to reevaluate their own positions in the investment/management arena and "disrupt themselves."

Not only does innovation require confrontations with reality, it requires an upset in the everyday business model.

"Traditional managed accounts are a profitable business at Schwab, but that didn't keep the firm from undercutting its own products with Intelligent Portfolios in order to remain competitive," the company said.

"Digital businesses continuously exploit digital technologies to both create new sources of value for customers and increase operational agility in service of customers."

Image credit: HumanRobo, Wikimedia

Posted-In: Charles SchwabEducation Tech Personal Finance General Best of Benzinga


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