Another one bites the dust.

Schwab will shut down its premium service combining digital advice and human advisors, Schwab Intelligent Portfolios Premium, at the start of next year. The discount brokerage will continue to offer its core, online-only service, Intelligent Portfolios, which has a $5,000 minimum and doesn’t charge a fee. It’s the latest example of traditional banking giants abandoning their robo aspirations, coming on the heels of similar announcements from UBS and US Bank. But Schwab’s move marks the first major example of a bank tossing just its premium service, as opposed to throwing the whole robo baby out with the bathwater.

“A bulk of [Schwab’s] assets were at the Intelligent Portfolios, digital-only tier,” said David Goldstone, manager of investment research at Condor Capital, which publishes a quarterly report on robo-advisors. “I won’t be surprised if Schwab decides to refocus on their [core] offering as it exits the hybrid, premium tier.”

Cash Cow

Schwab was one of the first major brokerages to enter the robo space, launching Intelligent Portfolios in 2015. Since then, the non-premium service has garnered more than $80 billion in assets. A main reason for shuttering the top-tier service is that hybrid offerings, which combine human and digital advice, are much more difficult to scale, Goldstone said. What makes Schwab different, he added, is that it was able to scale its basic product. “If you have a hybrid offering where you’re offering live advisors, more so than just phone support or chat, it doesn’t scale nearly as well,” Goldstone said. “For Schwab Intelligent Portfolios Premium, as you added clients, you also had to add staff. You had to add CFPs to be able to support those clients.”

Schwab’s basic service, rather than charging a fee, has a high cash allocation, which it sweeps into accounts that generate interest for the bank. This allocation hovers around 10%, Goldstone said, but varies depending on the selected risk tier. The strategy allows Schwab to earn money on its automated accounts. “It’s not directly a fee, but that’s what the business model is, is like generating a bunch of cash … I’m not a big fan of it,” he added. “I would rather see a pretty transparent fee on the AUM instead of holding back performance by investing a ton in cash.”

What Now? Schwab is still a major player in the incumbent robo offering space, or products that are offered as part of a larger, long-standing bank or brokerage. Vanguard maintains both its digital and hybrid offerings, and among independent products, Betterment and Wealthfront take the lead. “There’s still quite a few out there,” Goldstone said. “There’s been some closures, but most of the major banks launched one of these, and [only] a couple of them have shut them down.”

Get ready to hit the runway.

Despite the White House pushing for expanded access to private markets, many advisors view them as overly complex or unnecessary. SEC Commissioner Caroline Crenshaw went even further, calling broader retail access to all alternatives an “irresponsible departure from foundational pillars of the securities laws.”

Customizable model portfolios, however, may offer a path around such skepticism, some asset managers believe. The products allow advisors to spend less time sifting through stocks, bonds, mutual funds and ETFs and more time focused on financial planning. For proponents, that makes them a natural home for alternatives.

“In the past, private markets have been difficult to access and time-consuming to implement for advisors,” said Karl Desmond, client portfolio manager at Invesco, adding that advisors aren’t necessarily against private markets, they just want them simplified.

In Vogue

While every client is different, the traditional 60/40 stock-bond portfolio remains a baseline. Invesco, however, expects that framework to evolve as alternatives become more accessible. “We see the ideal mix as something like 61/34/5,” said Alessio de Longis, Invesco’s head of asset allocation. That final slice might include liquid strategies such as managed futures and long-short equity, as well as more illiquid assets like private equity and private credit.

Over the past year, major firms including Fidelity, BlackRock and JPMorgan have added alternatives to their model portfolios. The move reflects how widely models are already used:

• Roughly three-quarters of advisors rely on third-party model portfolios today, according to Morningstar.
• Broadridge projects assets in US model portfolios will surpass $13 trillion by 2029, up from about $8 trillion today.

Strike a Pose. Interestingly, de Longis noted that family offices, which often allocate heavily to private markets, use model portfolios in the opposite way: to simplify public market exposure for ultra-high-net-worth clients. Desmon added that even firms with large investment teams of 10-plus CFAs find use for model portfolios for smaller accounts.

‘Tis the giving season, but that’s not necessarily exclusive to Chrismahanukwanzakah.

The holidays are a time when many choose to lend a hand and give back. Advisors, who tend to be more financially well off than most Americans, feel a real compulsion to help out their communities. However, that commitment is often year-round. “My family relied on food assistance when I was a kid in the early 1980s, and I still remember the big blocks of cheese and sacks of rice that got us through,” said Patrick Huey, founder of Victory Independent Planning. Now, Huey is highly engaged in charity work, donating his time, money and expertise to food pantries in Florida.

“I don’t think of this as a December-only activity,” he said. “The holidays are a natural reminder, but hunger isn’t seasonal.”

An Advisor’s Work Is Never Done

Perhaps the most natural way advisors give back is pro bono work:

• Last year, certified financial planners reported nearly 18,000 hours in pro bono work, according to the CFP Board.
• Some 17% of all CFPs volunteered their services, a 16% increase from the year prior.

Vered Frank, founder of StackWealth, divides her time between Eve Wealth and the non-profit Savvy Ladies, two groups that aim to help women build financial education and independence. Additionally, she volunteers at two dog shelters. “While the conversations and situations I encounter through volunteering — whether with people or dogs — can sometimes be difficult, the act of helping others gives me a deep sense of purpose,” she told Advisor Upside, adding she plans to do even more pro bono work next year and is currently enrolled in an IRS-sponsored program offering tax counseling for the elderly.

Practice What You Preach. Many advisors also do exactly what they recommend to their clients. Catherine Valega, founder of Green Bee Advisory, said she personally and professionally likes donor-advised funds, charitable accounts that give owners immediate tax deductions. “Each year around Thanksgiving, I ask my four daughters to research their non-profit of choice for the year, and our DAF makes gifts,” she told Advisor Upside. “That gives me so much joy, knowing that I’m instilling a sense of philanthropy early.”