The launch of Charles Schwab’s Intelligent Portfolios and Institutional Intelligent Portfolios last year was undoubtedly the most significant robo-advisor development in the U.S. in 2015. MyPrivateBanking profiled Schwab Intelligent Portfolios in our Robo-Advisor 2.0 report and in our just published Hybrid Robo report, “Hybrid Robos - How Combining Human and Automated Wealth Advice Delivers Superior Results and Gains Market Share” , we take a closer look at Schwab’s Institutional Intelligent Portfolios (SIIP) as one of the report’s five case studies.
SIIP provides most of the advantages of digital investment management with the opportunity for a wealth manager to customize their own recommended asset allocations from a choice of 450 exchange traded funds that Schwab makes available for the purpose.
One aspect of the Institutional Intelligent Portfolios that took our attention was the way in which different advisory firms can use the Schwab solution to enhance their own offering in different ways. For example, it is perfectly possible for a wealth manager to to make SIIP available as an almost completely separate service with its own website and completely different branding. In effect, a registered independent advisor or financial planning firm that did this would be creating their own ‘pure’ robo-advisor. This limits the danger of cannibalizing the firm’s main client-base but it also restricts the possibilities for the users of the robo service. Longer-term, we believe that the future lies with greater integration of the digital component with a firm’s other services to create a hybrid offering of robo features and tools and personal interaction.
The most obvious kind of integration would be full integration on the wealth manager’s website with the SIIP option standing alongside a wealth management firm’s existing services, whether these are discretionary investment management, retirement planning, tax planning, specialist advice services for alternative investments or the other specialist services that a firm has made into USPS. This kind of transparent approach has much to recommend it and it is already being followed by some firms. For a firm specialising in just financial planning but which wants to provide an investment management component, this policy has clear benefits.
One more subtle alternative approach might be to have, say, a client rewards programme that is shared by a firm’s SIIP users and by its full service clients. Perhaps even more effective would be to allow SIIP users to make use of a finance management dashboard like eMoney that your full service clients are already benefiting from. Allowing the users of a firm’s digital offering to participate in behind the log-in features like these signals a much clearer welcome to smaller accounts (which will hopefully become full service accounts in time) than a standalone robo-advisory website can achieve on its own.