Charles Schwab is one of the leading players in the US financial advisory services space with 11.3 million customer accounts and over 7% of the $45 trillion total that is invested there.


Now the Wall Street Journal reports that the financial services behemoth is leading major changes across the industry with its decision to charge a flat monthly fee for its hybrid robo-advice in the way that companies such as Netflix and Spotify charge monthly fees for their consumer services.

Such is the company’s influence that the move away from charging directly for financial advice is expected to cause a ripple effect throughout the industry.

Schwab’s new subscription service includes a one-time fee of $300 for planning and a $30 monthly subscription that does not change at higher asset levels.

For those who sign up with Schwab Intelligent Portfolios Premium, at an annual price of $360 after the first year, they will receive access to investment management, a financial plan, and unlimited guidance from a certified financial planner, regardless of the value of their portfolio.

The service also offers tools that can help clients set objectives, define risks, minimize taxes, save for college, finance a home, manage debt, etc.

The new pricing model is applied to its hybrid robo-advice service, a type of investing widely popular among millennials that use rival platforms like Robinhood and Wealthfront; it previously levied an asset-based fee of 0.28% of the value of the client’s portfolio, a method that was seen in many quarters to penalise an investor’s diligence.

Writing in the Wall Street Journal, investing columnist Jason Zweig argues that the old AUM model, could charge hefty annual fees based on portfolio size, and led the masses to believe that investing ‘is arcane and expensive, while financial planning is mundane and unimportant.’

Schwab’s move comes at a time when investment management fees have been reducing and there is an increasing recognition that advice from a skilled financial planner can be shown to ‘do wonders for your net worth’ as the quoted industry expert would have it.

‘Schwab’s move should send a shock wave through the marketplace’

Zweig said ‘Schwab’s move should send a shock wave through the marketplace: Financial planning is the service that is worth paying more for, while its investment management that ought to be close to free’

Schwab’s sheer size and influence on the retail investment community could encourage other firms to shift their approach; Gavin Spitzner, of Wealth Consulting Partners said: ‘We’re going to look back at this day and say it was a monumental change in our business’ relating the company’s recent announcement to when the deregulation of commissions allowed for the creation of discount broker like Schwab almost forty-five years ago.

Michael Kitces of XY Planning Network, which supports roughly 900 advisors, and is adding 30 a month, believes others are bound to follow suit: ‘I’m giving Vanguard three months – six tops – to similarly launch a high monthly subscription tier for [Personal Advisor Services] for a deeper planning relationship,’ he said, adding that ‘having a firm as large of Schwab move into the monthly model for financial advice validates the approach at a whole other level.’

However, not all are so upbeat on the lower-cost hybrid model; Vance Barse, of Manning Wealth Management warns that individuals with complex needs may be attracted by the budget-friendly model, yet could end up under served.


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