Investing News

Wealthfront vs. Schwab Intelligent Portfolios: Which Is Best for You?

6 months ago
55 Views
18 Min Read

One of the first robo-advisors compared to an asset-gathering behemoth

Reviewed by Amilcar Chavarria

Wealthfront and Schwab Intelligent Portfolios are distinct enough to make the choice rather easy regarding which is best for you. If you don’t have the $5,000 minimum required by Schwab Intelligent Portfolios, then Wealthfront’s $500 account minimum is an easier bar to clear. In terms of fees, however, Schwab Intelligent Portfolios has no fees compared to 0.25% at Wealthfront.

Both robo-advisors offer some level of portfolio customization, and Schwab’s Intelligent Income option is a find for those seeking sustainable cash flow. Knowledgeable Wealthfront users can put their own stamp on the portfolio by adding additional exchange-traded funds (ETFs). Wealthier investors might lean toward Schwab’s Intelligent Portfolio Premium with Certified Financial Planner access and low subscription pricing. For those looking for access to more traditional support, the 24/7 customer service and branch access available at Schwab is also enticing. We will compare both digital investment advisors to help you decide which is best for you. 

Key Takeaways of Wealthfront

  • The extensive customization options, including over 200 ETFs and two cryptocurrency funds, are good for investors looking to tweak their portfolio compositions. 
  • Wealthfront offers a high-yield cash management and borrowing account.
  • The Path is a best-in-class financial planning tool in the digital investment advisory sphere. 
  • Wealthfront is best for investors comfortable with an all-digital platform and weekday-only phone customer service.

Key Takeaways of Schwab Intelligent Portfolios

  • Schwab offers highly diversified portfolios with U.S., Global, and Income choices.
  • Phone and financial representative customer service is available 24/7.
  • Fee-free investment management is a rare benefit for cost-conscious investors.
  • The required cash allocation and high account minimum may deter some investors.

Account Setup

Wealthfront

The Wealthfront account setup process is quick. Users complete an initial questionnaire that assesses goals, timeline, and risk level. You can create an account with your name, email, address, phone number, and password. No Social Security number is required to view the suggested Core portfolio, which is a nice benefit. The Core offer includes U.S. and international stock and bond ETFs along with a real estate ETF—another plus not found on some competitors’ platforms. Users can check out alternate portfolio choices before transferring funds into the account. 

You will need a $500 minimum to begin investing at Wealthfront. The management fee of 0.25% of assets under management is near the average digital advisory cost. No financial planners are available at Wealthfront, although the well-trained customer service representatives each have, at a minimum, a Series 7 investment license. More sophisticated investors can add to existing portfolios or create a new portfolio from a choice of 200-plus ETFs and cryptocurrency funds. 

The well-regarded Path digital financial planner, available to clients and the public, enables users to link external accounts and receive high-level digital financial planning guidance. 

Schwab Intelligent Portfolios

To set up an account, Schwab Intelligent Portfolios guides users through 12 questions spanning investing goals, timeline, and risk tolerance. Your responses inform a customized investment portfolio containing ETFs and a cash allocation. You must open and fund an account to view the actual names of the tailored portfolio ETFs. This drawback is partially offset by Schwab’s choice of low-fee, diversified funds for Intelligent Portfolios.

The barrier to entry is a $5,000 account minimum, steeper than many digital investment managers. Making up for the high account minimum, however, is the fact that Schwab Intelligent Portfolios doesn’t charge an investment management fee. Some investors will take issue with the higher than average cash allocation within each portfolio as it can contribute to performance drag over time. In especially conservative portfolios, the cash allocation can reach 30%, but investors with greater risk tolerance will find cash allocations of 6% within Schwab’s global and U.S.-focused strategies.

The Schwab Intelligent Portfolios interactive tool provides potential best- and worst-case scenario investment returns based on investment strategy and risk tolerance level. Although Schwab Intelligent Portfolios’ basic version doesn’t include investment advisors, you can visit a branch or speak with a well-qualified customer service representative for basic guidance. 

Account Setup Verdict: Wealthfront

Onboarding is easy at both platforms. That said, we like the opportunity to view specific ETFs before funding an account at Wealthfront, so it gets the edge in this category. 

Account Types

Most investors will find sufficient account types at either platform. Wealthfront has a high-interest cash account, which requires an additional sign-up. Schwab requires a new account for its checking account with a debit card. Other account differences include a 529 college account at Wealthfront and Schwab’s custodial and SIMPLE individual retirement accounts (IRAs). 

Wealthfront

Schwab Intelligent Portfolios

  • Individual taxable
  • Joint taxable
  • Traditional IRA
  • Roth IRA
  • SEP IRA
  • SIMPLE IRA
  • Revocable living trust
  • Custodial

Account Types Verdict: Tie

The basic account types are available at both Wealthfront and Schwab, so this category is effectively a tie. If you are looking for a 529 plan, choose Wealthfront. Those seeking a custodial account or SIMPLE IRA should select Schwab.

Account Services

Wealthfront

Investors who open an account with Wealthfront will have access to all of the expected financial products and services available at a major financial firm. Presently, Wealthfront customers have the usual auto deposits along with cash accounts, debit cards, and lending.

Schwab Intelligent Portfolios

Schwab Intelligent Portfolios sticks with investment management without checking, debit cards, or lending products within the robo-advisory. But with a click, Intelligent Portfolios users can sign up for banking, lending, self-directed investing, and more within the larger Schwab financial services universe. 

Cash Management

Wealthfront

Wealthfront Cash management requires a separate sign-up. The fee-free, high-yield checking account is available to anyone, whether they have a Wealhtfront investment account or not. Top features include goal-based saving, a fee-free ATM debit card, bill pay, and direct deposit. Wealthfront Borrow provides account holders with at least a $25,000 account value the opportunity to borrow up to 30% of their holdings for low interest rates without a credit check. Uninvested funds in a Wealthfront account are swept into a money market fund currently yielding 5.13%.

Schwab Intelligent Portfolios

Schwab Intelligent Portfolios doesn’t offer cash management within the robo-advisory platform, but access to cash management is quite straightforward. Anyone can open a Schwab high-yield checking account with debit card, banking, and brokerage services. Schwab Intelligent Portfolios does hold a larger amount in cash than most robo-advisors that strive to be fully invested except for enough to cover fees. That said, it also offers a cash sweep to Schwab Government Money Fund – Sweep Shares, yielding 4.92%.

Cash Management Verdict: Tie

At both Wealthfront and Schwab, you need to set up separate accounts for cash management. The distinction between the two is that Wealthfront’s cash management is more integrated with its investment services.

Goal Planning

Wealthfront

Winner of our Best for Goal Planning overall category, Wealthfront is superb for mapping your future plans. Choose from goals such as large purchases, college planning, and retirement. Your progress is updated automatically on the dashboard. The Path digital financial planner provides the opportunity to try out multiple goal-based scenarios. The tool can answer more than 10,000 financial planning questions, including “When can I retire?”, “How much should I save for a home down payment?”, and “Can I afford a new car?”. For a large majority of people, the Path is an effective replacement for a human financial planner in most situations. 

Schwab Intelligent Portfolios

At Schwab Intelligent Portfolios, goal planning includes choices such as retirement, college, home down payment, long-term wealth, and income. Users can access Schwab’s interactive tool to assess how changes in the market, contribution rates, and other factors will impact the likelihood of achieving goals. All Schwab clients can access its digital financial planning tool, which helps you clarify your goals and create a personalized investment strategy. 

Users seeking a digital investment advisor with financial planner access can sign up for Schwab Intelligent Portfolios Premium. Clients with $25,000 or more gain access to a Certified Financial Planner on an as-needed basis, along with automated investment management for the subscription pricing of $30 per month and a one-time setup fee of $300.

Goal Planning Verdict: Wealthfront

Both Wealthfront and Schwab Intelligent Portfolios offer top-notch goal-planning and advice options. As mentioned, however, Wealthfront’s Path digital financial planning tool is almost a match for a live financial planner, so we give it an edge here for having comprehensive digital advice within the platform.

Portfolio Construction

Wealthfront

Wealthfront’s investment portfolios are created by an investment management team using modern portfolio theory (MPT). The investment team blends a variety of asset classes represented by ETFs to match the risk appetite of a given investor. Wealthfront’s standard portfolio options include:

  • Classic portfolios with diversified, low-fee index funds
  • The Socially Responsible portfolio, focusing on socially responsible ETFs
  • Direct Indexing with individual stocks ($100,000 account minimum)
  • The Automated Bond portfolio, meant to create cash flow

Schwab Intelligent Portfolios

Schwab Intelligent Portfolios also uses an investment management team to build its portfolios. The team uses a combination of 51 ETFs to generate 80 variations to match the range of investor goals, time horizons, and risk tolerance using modern portfolio theory. Schwab doesn’t offer a socially responsible version of its portfolios.

Portfolio Construction Verdict: Wealthfront

Both Schwab Intelligent Portfolios and Wealthfront use ETFs to represent the typical range of assets including U.S. and international stocks, bonds, REITs, and commodities. Wealthfront gets a slight edge here for having socially responsible and direct indexing options.

Available Assets

  Wealthfront Schwab Intelligent Portfolios
Individual Stocks Yes: Direct indexing for accounts worth $100,000+ No
Mutual Funds  No  No 
Fixed Income  Yes (through ETFs) Yes (through ETFs) 
REITs  Yes (through ETFs) Yes (through ETFs)
Socially Responsible or ESG Options  Yes  No 
ETFs  Yes  Yes 
Non-Proprietary ETFs  Yes  Yes
Private Equity  No No 
Forex  No  No
Crypto  Yes, through iShares by BlackRock Bitcoin Trust (IBIT) No 

Portfolio Customization

Wealthfront

Wealthfront ramped up its customization features by adding access to 200-plus ETFs and cryptocurrency funds. Users can add additional ETFs to existing portfolios or create new customized portfolios with their own picks. Wealthfront also has an Automated Bond portfolio for conservative investors seeking income.

Schwab Intelligent Portfolios

Schwab Intelligent Portfolios users can change their asset allocation composition by retaking the initial goals and risk questionnaire. You can also exclude up to three ETFs from the portfolio. Users may choose a U.S. domestic portfolio of ETFs or a global option. The platform also offers an Income portfolio choice for those seeking cash flow from a more conservatively invested account, with greater allocations to cash and fixed-income ETFs. 

Portfolio Customization Verdict: Wealthfront

Although Schwab Intelligent Portfolios and Wealthfront construct portfolios the same way, Wealthfront offers far more options to take that initial portfolio and tweak it by adding specific ETFs. Wealthfront takes this category handily.

Portfolio Management

Wealthfront

Wealthfront monitors portfolios daily and rebalances when investment values deviate significantly from the target weight you agreed upon. Wealthfront rebalances your portfolio whether you’ve customized it or not.

At Wealthfront, you can sync outside accounts using the Path digital financial planner. Path is designed to answer thousands of financial planning questions and will make recommendations based on all of your linked accounts. The synced accounts don’t impact your portfolio’s asset allocation recommendations.

Schwab Intelligent Portfolios

Schwab Intelligent Portfolios also monitors your holdings daily and rebalances when needed. Schwab doesn’t enable syncing of outside accounts. One feature that stands out at Schwab is the Intelligent Income option, where the platform helps you calculate how much you can safely take out based on your investments and balance.

Portfolio Management Verdict: Schwab Intelligent Portfolio

Wealthfront and Schwab Intelligent Portfolios both use a drift-based approach to rebalancing. We give Schwab Intelligent Portfolios the edge on management due to its support in drawing down your portfolio as well as building it up.

Tax-Advantaged Investing

Wealthfront

At Wealthfront, tax-loss harvesting opportunities are monitored daily in taxable accounts. Wealthfront also follows tax-efficient investing practices, such as using municipal bond ETFs in taxable accounts.

Schwab Intelligent Portfolios

At Schwab, only those with at least $50,000 in their accounts can opt for tax-loss harvesting. Schwab Intelligent Portfolios also engages in tax-efficient investing when building taxable portfolios, and further considers taxes when drawing down a portfolio in the Intelligent Income option.

Tax-Advantaged Investing Verdict: Wealthfront

Wealthfront edges out Schwab Intelligent Portfolios here simply because Wealthfront customers benefit from tax-loss harvesting on all taxable accounts, while Schwab customers need at least $50,000 in assets.

Key Portfolio Management Features

  Wealthfront  Schwab Intelligent Portfolios 
Automatic Rebalancing Monitored daily and rebalanced as needed Monitored daily and rebalanced as needed
Reporting Features  Statements, tax information; goal progress viewable online  Statements, tax information; goal progress viewable online 
Tax-Loss Harvesting  Yes  Yes, for accounts worth $50,000+ (clients must opt in)
External Account Syncing/Consolidation  Yes, automatically updated after linking; used in Path recommendations, not portfolio asset allocation No 

Security

Wealthfront and Schwab Intelligent Portfolios enable top-level, financial institution-grade security protocols. Both also offer two-factor authentication and the highest level of privacy standards. Cash accounts at Wealthfront are insured with the Federal Deposit Insurance Corporation (FDIC) while investment accounts carry Securities Investor Protection Corporation (SIPC) insurance on each platform. You can be confident your money is protected with the highest bank-grade security features and insurance protection for institutional failure and bad actors at both Wealthfront and Schwab Intelligent Portfolios.

Security Verdict: Tie

Users can be comfortable with the security protocols at either digital investment advisor. However, no investment service protects your money from the fluctuations of the financial markets.

User Experience

Desktop

Wealthfront

Wealthfront users will find a clean interface and accessible menu on the desktop site. The home screen includes tabs for Invest, Cash, Borrow, and Blog. Other categories within reach include Research, Support, and Contact.

Schwab Intelligent Portfolios

Schwab Intelligent Portfolios offers an easy-to-navigate, tab-based dashboard. Users can view Portfolio, Goal, Performance, Activity, and Settings at the touch of a button. Clients can easily compare their performance to various benchmarks and view goal performance.

Mobile App 

Wealthfront

Wealthfront’s mobile app is well-regarded, with a good user experience on both the Android and iOS platforms. The app approximates the functionality of the desktop version. Anyone can link their accounts and use the Path digital financial planner. This is a benefit for portfolio insights and financial analysis. 

Schwab Intelligent Portfolios

Schwab doesn’t have a dedicated Intelligent Portfolios app. Schwab is updating its Android app soon to make access to Intelligent Portfolios easier. That said, you can access most of the desktop features on the mobile app. Users will appreciate that customer service is very convenient to access via the app. 

User Experience Verdict: Wealthfront

Wealthfront’s mobile app surpasses the functionality and features of the Schwab mobile app.

Customer Service

  Wealthfront Schwab Intelligent Portfolios 
Phone Contact Available 7 a.m. – 5 p.m. PT, weekdays 24/7
Pre-Funding Phone Consultation With Certified Advisor  No  No 
Online Chat Available  No  Yes, 24/7 with customer service representative 
Website FAQ section  Yes, comprehensive  Yes, comprehensive 

Customer Service Verdict: Schwab Intelligent Portfolios

Customer service at Schwab is superior to Wealthfront’s. With 24/7 live access options as well as nationwide branches, it’s easier to receive live help at Schwab. Wealthfront’s phone representatives are well-trained, but phone access is somewhat difficult to find on the website. That said, both platforms offer good quality FAQ and search features.

Fees

Wealthfront

Wealthfront charges 0.25% of assets managed, regardless of portfolio size. This is a fair price for the platform’s robust features and significantly lower than a typical financial planner. The tradeoff is that users need to be comfortable with limited human hand-holding. 

Schwab Intelligent Portfolios

The Schwab Intelligent Portfolio all-digital option doesn’t charge any management fees. The uniform pricing for the Schwab Intelligent Portfolios Premium is $30 per month with a one-time $300 setup fee. This is rock-bottom for larger accounts but high for accounts between $25,000 and $72,000. For example, a $50,000 account will cost 0.72% of assets under management (AUM). But once your portfolio hits $300,000, the AUM fee is a paltry 0.12%. Of course, investors don’t have to choose the premium option and can continue to use the $0 offering.

Fees Verdict: Schwab Intelligent Portfolios

Schwab Intelligent Portfolios is preferred for investors seeking investment management without a management fee. However, Schwab users will need to accept a higher cash allocation and forgo the customization options available at Wealthfront. Both Schwab and Wealthfront use low-fee ETFs within their portfolios.

Category Wealthfront Schwab Intelligent Portfolios
Management Fees for $5,000 Account $12.50 $0
Management Fees for $25,000 Account $62.50 $0 ($30 per month plus $300 setup fee for Premium)
Management Fees for $100,000 Account $250 $0 ($30 per month plus $300 setup fee for Premium)
Termination Fees $0 $0
Expense Ratios Average 0.08% 0.02% to 0.19% (0.13% weighted average)
Mutual Funds N/A N/A

The Bottom Line

Wealthfront is the winner of Best Overall and a number of other categories in our 2024 Robo-Advisors Review. This makes Wealthfront a solid choice for any investor comfortable with an all-digital investment service. Wealthfront is also the choice for those without the $5,000 minimum required by Schwab. The addition of 200-plus ETFs for customization, cryptocurrency funds, and the Path financial planner places Wealthfront among the best robo-advisors available.

While Schwab Intelligent Portfolios is clearly the low-fee choice, wealthier investors seeking a combined human and digital platform might lean towards the Schwab Premium offer. Existing Schwab customers as well as those seeking extensive customer service options or an income portfolio might prefer Schwab Intelligent Portfolios. In the final analysis, both platforms are well-regarded, and the choice between the two depends upon the features and services that you are seeking.

Can You Have Multiple Schwab Intelligent Portfolios?

Yes, you can open a different Schwab Intelligent Portfolios account for each goal. For instance, you can have one portfolio be risk-averse and a second portfolio that’s more risk-tolerant. The goal tracker will monitor your progress towards each goal separately.

What Happens to My Money If Wealthfront Goes Out of Business?

It’s important for customers to note that Wealthfront is not a bank. However, customer deposits are insured through Wealthfront’s partner banks. Wealthfront’s cash account offers up to $5 million in FDIC insurance for individual accounts and up to $10 million for joint accounts.

Can Customers Take Money Out of Wealthfront?

Yes. Customers can withdraw money from Wealthfront with no fee. There are, however, daily limits for transfers in and out of Wealthfront accounts, for security purposes.

Which Is Better: Wealthfront or Schwab?

Both Wealthfront and Schwab Intelligent Portfolios are well-regarded, diversified, and reasonably priced robo-advisors. Schwab doesn’t charge management fees but requires you to hold cash in the portfolio. Wealthfront offers greater customization options and excellent digital financial planning tools at a lower account minimum and competitive fee. It really does depend on what you are looking for. That said, Wealthfront was our overall winner with the caveat that it works best for those who are ready for truly digital investment management. 

How We Review Robo-Advisors

Providing readers with unbiased, comprehensive reviews of digital wealth management companies, more commonly known as robo-advisors, is a top priority of Investopedia. We used our 2023 consumer survey to guide the research and weightings for our 2024 robo-advisor awards. To collect the data, we sent a digital survey with 64 questions to each of the 21 companies we included in our rubric. Additionally, our team of researchers verified the survey responses and collected any missing data points through online research and conversations with each company directly. The data collection process spanned from Jan. 8 to Feb. 9, 2024.

We then developed a quantitative model that scored each company to rate its performance across nine major categories and 59 criteria to find the best robo-advisors. The score for each company’s overall star rating is a weighted average of the criteria:

  • Goal Planning – 21.00%
  • Portfolio Contents – 17.00%
  • Portfolio Management – 17.00%
  • Fees – 15.00%
  • Account Services – 10.00%
  • Security & Education – 5.00%
  • User Experience – 5.00%
  • Account Setup – 5.00%
  • Customer Service – 5.00%

Additionally, during our 2023 research, many of the companies we reviewed granted our team of expert writers and editors access to live accounts so they could perform hands-on testing. Through this all-encompassing data collection and review process, Investopedia has provided you with an unbiased and thorough review of the top robo-advisors.

Read more about how we research and review robo-advisors.

Separately, our research team conducted a survey of 205 U.S. adults aged 18 to 72 who are current clients of one of 18 robo-advisors. While the information collected did not influence the development of our ratings model, it was instrumental in gathering the valuable insights published in Investopedia’s 2023 Robo-Advisor Consumer Survey.

Participants in our 2023 Robo-Advisor Survey opted in to an online, self-administered questionnaire from a market research vendor. Data collection took place between Aug. 30 and Sept. 15, 2023, with 11 video interviews conducted with volunteer respondents from Sept. 7 to Sept. 17, 2023. Multiple quality checks, including screeners, attention gauges, comprehension evaluations, and logic metrics, among others, were used to ensure only the highest quality responses were included.

Dotdash Meredith receives cash compensation from Wealthfront Advisers LLC (“Wealthfront Advisers”) for each new client that applies for a Wealthfront Automated Investing Account through our links. This creates an incentive that results in a material conflict of interest. Dotdash Meredith is not a Wealthfront Advisers client, and this is a paid endorsement. More information is available via our links to Wealthfront Advisers.

Read the original article on Investopedia.

Newsletter