Wealthfront vs. Schwab Intelligent Portfolios

Finding the right balance of effortlessness and high returns is what many are looking for in a robo-advisor. Unfortunately, many such services tend to seem cheaper and more innovative in their ads then they are in real life.

Charles Schwab, the financial giant, has a hybrid robo-advisory with all the latest gadgets and perks but with an added bonus of having no management fees. Is this service really better than Wealthfront and other low-cost robos?

General Comparison and Overview ⚔️

This article will answer just that. Also, we will explain why most “free” wealth management services usually incur some hidden expenses that turn out to cost more than using a paid service. Let’s take a look at Wealthfront Intelligent Portfolios and Wealthfront to see which service is the best bang for your buck.

What is Wealthfront? 🤔

Wealthfront is among the top robo-advisor providers in the US today. Since it was founded in 2014, the company has expanded to the point where it has over $20 billion in assets under management. The competitive price and a fully-digital advisory service have made Wealthfront a very common choice for millennial investors who make up a large chunk of this robo-advisor’s clientele. 

What is Schwab Intelligent Portfolios? 💭

This robo-advisory is just one of many services provided by the American financial giant, Charles Schwab Corporation. The corporation was founded in 1971 and has since established a world-famous discount brokerage and a banking service. 

Schwab Intelligent Portfolios is one of the latest additions to the Schwab family but is already the second-largest robo-advisor in the US with over 41 billion in assets under management. The robo-advisor is well-known for having no fees and providing a solid service in all areas.

Planning and Portfolio Strategy 📅

Getting started with any robo-advisor means setting up a financial plan. This might sound complicated, but in fact it couldn’t be any more simple. Wealthfront and Schwab have very similar planning systems that require very little time and effort from the client.

You don’t need to know anything about investing, rather you just need to give the platform some personal information and it will create a proven financial portfolio that suits your goals immediately. Let’s see what kind of planning these two robos allow.

Wealthfront 🏛️

Your interaction with Wealthfront’s investing service will start with its planning system called “Path”. First, you will need to fill out a questionnaire that will ask you about your age, income, financial goals, etc. The information you can input here is extensive – you can even put in a sabbatical as an important financial event, which is very handy. 

Based on your answers, Path will offer you a portfolio that should align with your desires and capabilities. If you don’t like the prediction Wealthfront has made, you can tweak your portfolio by raising or lowering your risk tolerance. Once you reach an arrangement you like, your money will be automatically invested and will start growing.

This goal-setting system is easy enough to use but gets very detailed. If you’re looking to save up for college or buy a house, Path can make some quality predictions. The platform will use reputable third-party sources, including government websites to estimate where the prices will go in the future and give you a realistic goal to aim for.

You can keep an eye on your portfolio’s performance easily through the investing app. To make matters more simple, you can invest in individual financial goals separately, giving you the ability to prioritize the more immediate ones.

To top that off, Wealthfront supports account aggregation, which means you can link all your financial accounts, like your bank account to this one and have a holistic view of your assets. 

If your portfolio isn’t growing as planned, the platform will alert you. Maybe you’ll need to deposit more money, change your portfolio, or pool assets from one goal to another to resolve the issue. Whatever the case may be, the platform will recommend these solutions, so there’s no need to worry.

As a fully-digital service, Wealthfront offers no human advice. However, the whole system is designed to be understandable and user-friendly even for complete beginners. That way you’ll know what’s going on, even if you haven’t had previous investing experience.

Charles Schwab 💰

Not unlike Wealthfront, Schwab will also ask you to fill out a questionnaire that will help the platform establish what your goals and investing capabilities are. After that, the platform will offer you a prediction of how your portfolio can look in the future. 

If you don’t like the prediction you can stress-test the plan by increasing or lowering the risk tolerance. All in all, very similar to Wealthfront but not completely. If you don’t like the portfolio you are offered, you can replace up to 3 ETFs with your assets of choice, giving you some flexibility.

You can’t set up multiple separate goals, as your entire portfolio is allocated into a single pool of assets. However, you can set up multiple accounts for different goals and control them pretty much as a single account since they’re linked. 

Schwab’s planning system is straightforward and without many features compared to some top robo-advisors. Your main portfolio customization tool on a basic account is the risk tolerance setting. 

Basically, if growth is your goal, then this ought to be set to aggressive. On the other hand, if you’re retired and want to keep your money safe above all else, the risk tolerance should be set to low. If your portfolio is producing a steady income, maybe you’ll want to set up regular automatic deposits and withdrawals, which makes the whole investing process much simpler.

This robo-advisor is fully-digital and offers fewer features than Wealthfront in the planning area unless you’re a premium client. Getting a premium account will give you access to a professional human advisor, which you can contact at least once a year. The advisors will help you set up a better, more personalized portfolio and they will always be there to help out if you find this whole investing ordeal stressful.

However, if you don’t find self-directed investing bothersome and want to get more directly involved, you can. Charles Schwab’s brokerage is considered one of the top online stock brokers in the US and has commission-free trading, so it’s very easy to switch to self-directed investing if you’re a Schwab Intelligent Portfolios user.

Schwab Intelligent Portfolios. Although Wealthfront has some advantages like investing in separate goals, Schwab gives a bit more customizability when it comes to choosing your ETFs. In most aspects, these two planning systems are very, very similar. However, Schwab users have the option of getting a human advisor to tend to their portfolios, which is not something you can get from Wealthfront.

Pricing & Fees 🏷️

Low prices are one of the main reasons why investors sometimes choose a robo-advisor instead of a traditional financial advisor. These two are a good example of affordable robos with one being cheap and the other free. However, in this case, Wealthfront’s low-fee service might actually be cheaper than Schwab’s free service due to a hidden drawback in Schwab’s pricing system. Let’s take a look at which one of these two will actually cost less.

Wealthfront 🏛️

The only fee you need to worry about here is the 0.25% annual management fee, which is very competitive. Getting in on the action isn’t that difficult either, as the minimum initial deposit is $500. So far, the fee structure seems very affordable, but that’s before the bonus features.

All new traders get the “PassivePlus” feature pack as soon as they sign up. This includes tax-loss harvesting, which means that Wealthfront will sell your assets in a way that will reduce your taxes, saving you from unnecessary losses year after year. This is the basic level of the service, but it automatically gets upgraded when your portfolio grows enough.

As soon as your portfolio reaches $100,000, you get direct indexing. This means that Wealthfront will buy individual stocks for you instead of getting ETFs and mutual funds which incur additional expenses. This will save you even more money in the long run.

Also at the $100,000 mark, you get risk parity. This term refers to an investing method that’s supposed to lower risks and increase profits, at least in theory. In practice, however, Risk parity hasn’t been proven as a completely reliable method. Many customers have accused Wealthfront of underperforming with this service, which is why some choose to opt-out of it.

If you get to $500,000, there’s one more service called “Smart Beta”. This means that Wealthfront’s experts will take the time to build you a better portfolio. Essentially, more research and analysis should lead to more returns for you.

If you’re looking for robo-advisors in this price range, there are a few very popular ones that are worth reading upon. For example, Betterment, Wealthfront’s fiercest competitor, and the most popular robo at the moment has the same price but also offers human advisor assistance for premium users.

Wealthfront Cash and Borrow 💵

Wealthfront also offers some banking services like a high-yield savings account and loans. If you want to stash your cash, you can do it on a Wealthfront Cash account where your money will earn a 0.26% APY. This rate is slightly smaller than what Schwab is offering at the moment, but both numbers are better than what an average bank offers.

As the robo-advisory client, you can borrow money against your portfolio – up to 30% of your portfolio to be exact. Since your portfolio is your guarantee, there’s no paperwork to worry about and your money can arrive quickly. The interest you have to pay is between 2.40% and 3.65%, which is lower than what the Schwab Bank charges for a short-term loan.

Schwab Intelligent Portfolios 💰

Schwab has the best possible management fee of $0, which is good but take that with a grain of salt – we’ll talk about returns a bit further down the line. The service is not as accessible to beginners as some, as you need $5,000 to get started. Although this is likely affordable to many who are seriously considering long-term investing, the starting requirements for most other top robo-advisors today are often much lower.

There is no management fee, so the only expenses you’ll need to worry about are the expense ratios of ETFs and taxes. Schwab can help with the ETFs by buy cheap ones for you, but you’ll only get help with taxes once your portfolio gets a lot bigger.

Unfortunately, your portfolio has to reach $50,000 before you get tax-loss harvesting. This service is common among robos but many of them, including Wealthfront, offer tax-loss harvesting immediately after you open an account. On top of that, Schwab requires you to manually enroll in the service which is a hassle, but worth it in the end.

The Premium account can give you access to a human advisor, but it isn’t free. You need to have at least $25,000 on your account and then pay a one-time $300 enrollment fee. After that, you have to pay a $30/month advisory fee, but you get an expert that can help you craft an optimized, high-performance portfolio. 

This is a high price tag and you have no guarantee that the optimized portfolio you get will perform well enough to make the $300 fee worth it. However, according to the company’s website, Schwab offers a full refund if you’re not satisfied with this service, which is not something you see very often.

A good thing about the Charles Schwab brand is that it has just about every type of financial service under its roof. As a robo-advisor client, you have access to the online Schwab Bank. 

The bank can take care of all your banking needs and you can open a high-yield savings account with a 0.3% APY, which is a slightly better interest rate than what Wealthfront has. You cannot use the bank to borrow against your portfolio but it’s still good to have all your finances in one place. 

Schwab Cash Sweep – Safe, But Reduces Returns 🏦

Unfortunately, keeping a part of your portfolio as cash isn’t optional. Depending on how aggressive your portfolio is, 6% to 30% of your money will be allocated into cash savings. 

According to Schwab, this allocation is good for ensuring the safety of your portfolio. This might be true sometimes but a big cash allocation can also lower your returns since it only grows at a rate that is currently 0.3% per year. Many robo-advisors that offer banking services use your cash to give loans to other customers, and Schwab is following suit. 

The cash allocation, or “Cash Sweep” as the company calls it, lowers the amount that is invested in profitable ETFs, which is not great. For example, imagine you had deposited money last year and 10% was held as cash. The cash would have grown at a very low rate, similar to the inflation rate. But what does an alternative scenario look like?. 

If 10% of your money was invested into S&P 500 instead, it would have grown by 28% in 2019, which is way, way better. In this case, the cash allocation would have reduced the annual growth of your entire portfolio by 1%-2%, which is equivalent to a very high management fee – not great at all.

However, in the market collapse we have seen this year, this cash reserve would have saved you from losing a lot of money, so there are situations where the cash allocation is a good idea too.

Schwab’s $0 management fee is a great feature but doesn’t negate the potential damage done by the Cash Sweep in many cases. The cash allocation limits the growth potential of your portfolio which is the same as having a relatively high fee gnawing at your yearly returns. On the other hand, Wealthfront has a very low fee, low initial investment, and zero hidden costs you need to worry about.

Investment Offerings 💲

The list of assets you can purchase is long and likely to satisfy most investors. The companies offer stocks, mutual funds, as well as investments in real estate, natural resources, etc.

Wealthfront 🏛️

There’s an ETF for just about any type of investment on Wealthfront’s platform, which is one of this robo’s better qualities. You can choose ETFs from 11 categories and most portfolios have around 7. The average expense ratio for Wealthfront’s primary ETFs is 0.06% – 0.13%, which is on the cheap side. Here are some of Wealthfront’s more popular ETFs:

In essence, Wealthfront has a great suite of products for long-term investing. Many of these profitable ETFs are available with other robo-advisors, but Wealthfront has a ton of them. That’s always good as it opens up possibilities for the investor.

Also worth noting is that when your portfolio reaches $100,000, you also become eligible for socially responsible investing. Essentially, you will be able to pick stocks from a list of “green” companies and have them bought for you. This way some users can make investments in accordance with certain ethical values like eco-friendliness. 

Schwab Intelligent Portfolios 💰

As one of the top ETF brokers around today, Charles Schwab has an impressive list of financial products. Naturally, these products are available to the clients of the robo-advisory as well. 

A typical portfolio holds 20 out of 53 ETFs that have been handpicked by Schwab’s experts as the most profitable. These include your usual large and small company stock ETFs, but also some more exotic products like REITs, MLPs, precious metals investments, and high dividend stock ETFs. The list of assets is pretty long, to say the least. 

On top of that, users can buy all Schwab ETFs, which tend to be on the good side when it comes to expense ratios. Here are some of the more popular ETFs you can get using Schwab Intelligent Portfolios:

You cannot buy fractional shares here and there is no socially-responsible investing available. All in all, the list of investment offerings you get with Schwab is impressive, but the fact that you cannot opt-out of having a 6%-30% cash allocation, is a drawback, especially in a very bullish market.

Wealthfront has an impressive list of cheap ETFs for your portfolio, as well as socially responsible investing. However, Schwab has an equally impressive list of products with the addition of Schwab ETFs, which can be a great addition to most portfolios. 

Platforms 💶

The desktop platform was designed to be very logical and easy to use without lacking in useful features. Everything you need can be accessed directly through the main screen, so it’s very hard to get lost or confused while using the platform.

Wealthfront 🏛️

The dashboard will show you the progress of your goals, your portfolio’s historical performance, as well as your current positions and asset allocation. All the basic data is right there when you log in, so checking on your assets is as simple as it gets.

The withdrawal and deposit buttons are on the transactions menu on the top of the page and you can even turn tax-loss harvesting and direct indexing on and off in a moment’s notice from the main screen. The interface is very easy to get used to, making the platform a great tool for users who want a no-hassle investing medium.

The mobile experience is what this investing software was originally made for. The mobile app has all the same features as the desktop version and mirrors its functionality to the letter. The platform suffers from a lack of real estate, as mobile apps always do, but that’s not a real drawback since the workflow is very intuitive regardless.

Also, very little typing is necessary. Everything is done by pressing big buttons and the only times you need to write something is when linking outside financial accounts and logging in to the platform.

All in all, the mobile app makes the whole investing process very simple with innovative solutions, which is one of the reasons why Wealthfront is popular among the millennial crowd.

Charles Schwab 💰

The desktop platform is visually pleasing and has an easy-to-understand, logical workflow. The main screen will show basic data about your asset allocation and the historical progress of your portfolio. 

Minimal searching is needed as all the main options are displayed on the dashboard. Checking your goals, previous activities, and making deposits/withdrawals can be done directly from the main screen. The customer support contact info is clearly displayed here too, making it easy to get help if you should need any.

The mobile app has the same capabilities as the desktop version. The first page you’ll come across is text-heavy, but after you get past it, things get a lot simpler. The app is very easy to get around, so you’ll have no problem finding everything and taking the actions you need to take.

You can also view charts showing the performance of a selected stock or index, as well as your entire portfolio. The app will tell you if your portfolio isn’t growing as quickly as planned, which will help you make adjustments and keep it going at the desired pace. All in all, just about all features you need are there and navigating the app likely won’t be difficult, even for a beginner.

Schwab Intelligent Portfolios has an easy-to-use platform that’s very similar to Wealthfront’s in functionality and design. The mobile apps also offer similar UIs that are very easy to navigate, and there is minimal typing needed. If you’re looking for an intuitive, user-friendly platform, you can’t go wrong with these two.

Customer Support 📞

Wealthfront doesn’t have live chat capabilities, but its phone service agents can be reached 5 days a week from 7 a.m. to 5 p.m. PT and the average waiting time is 2 minutes. Users can contact customer support via email, which is what we’ve done. 

We sent Wealthfront an inquiry to which they responded in only 3 hours, which is super-fast for an email service. The answer was helpful and had links to relevant information, which we consider a job well done by the customer service agent.

The customer service representatives are licensed professionals who can help you with simple matters like a lost password, as well as much more complex issues. Customer support can also be reached via Twitter, but email and phone are the quicker options by far.

Schwab Intelligent Portfolios is well-known for having top-notch customer support. Live chat is available on the Charles Schwab website as well as on the robo-advisor platform. Phone service is available 24/7 and reaching the representatives takes 2 minutes on average.

You can also send an email or use the live chat if you have questions. We asked a simple question through the live chat on Schwab’s website and got a satisfactory reply almost immediately, which is very laudable. Here’s a screenshot of our little chat.

If you want hands-on help, you can visit one of 300 branch offices Schwab has around the US, which is not a common feature among robo-advisors. All in all, Schwab’s customer service is reliable and lives up to its reputation as one of the best in the business.

Schwab has one of the best customer support systems in the industry. Wealthfront doesn’t offer live chat services, physical branches, and 24/7 availability, which is why Schwab comes out on top in this area. 

Safety 🛡️

Wealthfront has had a spotless record thus far when it comes to safety. The platform is secured with 256-bit encryption and has two-factor authentication. This is the industry-standard level of protection and most robos, including Schab, have this level of security.

All users are covered for up to $500,000 by the Securities Investor Protection Corporation (SIPC). Wealthfront is also regulated by the Financial Industry Regulatory Authority (FINRA), which is the top financial regulatory institution in the US. Also, Wealthfront Cash account users are covered with up to $1 million by the Federal Deposit Insurance Corporation (FDIC) in case something happens to their money.

Schwab Intelligent Portfolios also has a good reputation and the same level of account security as Wealthfront. Users are also insured for $500,000 by the SIPC, and all cash held with Schwab is insured for up to $250,000 by the FDIC.

Although Schwab is by no means unsafe, Wealthfront simply offers higher insurance. The cash you have with Schwab is insured for up to quarter of a million while Wealthfront offers a full million in coverage.

Bottom Line: Which Service is Better For You?

Many investors looking for a simple, fully-digital advisory service turn to Wealthfront for its very competitive price and comprehensive, yet user-friendly platform. On the other hand, Schwab Intelligent Portfolios provides all of that plus the option to get an actual human advisor.

Schwab’s pricing scheme, however, isn’t as great as it seems at first glance. The fact that a large part of all portfolios has to be cash lowers your portfolio’s potential for growth. Opposite to this, Wealthfront has a simple pricing system with one fee and a much lower starting requirement.