Schwab to offer free 'robo-advice' plan in first quarter 2015

Reuters News
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Posted: Oct 27, 2014 12:49 PM

NEW YORK (Reuters) - Charles Schwab Corp confirmed on Monday that it will introduce free automated investment plans picked by computer algorithms in the first quarter of 2015.

The program, which will be marketed as Schwab Intelligent Portfolios to retail investors and independent investment advisers, will create portfolios of exchange-traded funds managed by Schwab and other providers.

In offering the service without management, transaction or account service fees, Schwab intends to be "disruptive" to competitors that have rapidly been introducing "robo-adviser" platforms that charge fees of about 0.25 percent of money invested, Schwab officials said in a conference call with analysts and investors.

Reuters reported Schwab's plan to introduce a free robo-program on Oct. 3.

Schwab said it can make money through fees from managing and servicing underlying ETFs and from investing client cash in the portfolios. While the portfolios could draw investors who use conventional Schwab accounts or hire advisers who trade through Schwab, the company is not afraid of "cannibalizing" its own revenue, executives said.

The service will appeal primarily to Schwab's traditional self-directed investors who do not want to use its fee-based advice programs, Chief Executive Walt Bettinger said.

He would not name specific competitors Schwab expects to undermine, but said they range from independent firms that offer only automated programs, to "wirehouses," a reference to large full-service firms such as Merrill Lynch, Morgan Stanley and UBS AG's U.S. brokerage unit.

"This has the potential to create impact across the entire market," Bettinger said.

(Reporting by Jed Horowitz; Editing by Dan Grebler)