Charles Schwab’s Bernie Clark, head of the firm’s custody business, and chief executive Walt Bettinger kicked off the Schwab Impact conference Wednesday morning addressing the question on everyone’s mind: What’s up with Schwab’s plans to roll out a robo-advisor platform, and how might it impact advisors?

The new platform, coming early next year, will give advisors more choices in how they handle clients, Bettinger reassured the nearly 5,000 attendees at the event in Denver.

And it won’t be a threat to advisors’ business, he said.

“Think of the pyramid of services the advisor delivers” to clients, he said -- developing trust, setting goals, asset allocation, rebalancing, tax-loss harvesting and ongoing planning and adjustments.

“On top of all that, you’re probably playing psychologist, which [could be] the most valuable thing. All that the online [robo] space has done is go into the pyramid and taken the easiest three things to do -- asset allocation, rebalancing and tax-loss harvesting -- that’s it,” he said. “The idea that consumers are not going to want all those other things … I think is extraordinarily naïve. In no way is this a replacement.”

Bettinger noted that the $5 billion of existing robo assets “has occurred under the umbrella of a huge bull market, so we don’t know how these kinds of things are going to hold up when the inevitable bear market comes.”

Schwab’s robo offering, called the Schwab Intelligent Portfolios, will have a $5,000 minimum and invest in both Schwab and third-party ETFs.  

A white-label version for Schwab’s affiliated RIA firms will let them customize portfolios and set their own pricing, including the zero-management fee option that Schwab itself will be offering.

Schwab’s research shows that about half of its RIA firms are interested in using the robo platform, Bettinger said.

Assets will be custodied at Schwab, “so it will be integrated within your reporting,” he said.

ETFs in the program will be selecting using an institutional style process.
“This is a fiduciary offering, not a brokerage offering, so it is [done in the] client’s best interests,” Bettinger said.

The robo platform was developed from the ground up to be easy to use. “We did this completely separately in a skunk works type of development so there were no constraints,” Bettinger said.

He dismissed concerns that Schwab is conflicted by relying on its own ETFs or revenue sharing from outside ETFs to get paid on its robo offering.

Schwab is simply sharing those economics with clients, he said, unlike the existing robo firms.