Your Schwab Intelligent Portfolios® account is much more than just an algorithm. It's an automated portfolio with human oversight. Schwab Intelligent Portfolios was designed to use a combination of people and technology to help make investing more accessible, more efficient and lower cost. In fact, there's an entire team of experienced investment professionals involved throughout the portfolio construction and management process.
Human Side: Oversight & Research
Our team of investment professionals reviews and manages your portfolio while staying on top of market research to make important investment decisions for you.
Our Automated Investing Team runs daily review processes that ensure your diversified portfolio aligns with your assigned risk profile. On a daily basis, we oversee key components of our automated rebalancing and tax-loss harvesting algorithms to make sure trades are made timely and accurately.1 Our rebalancing algorithm reviews and rebalances your portfolio whenever asset classes drift too far from their target weights.2 Periodic rebalancing is done through a systematic process that reviews each position held in the portfolio, when it was purchased, the price at purchase, the drift from target weight, and how to efficiently buy/sell to keep your portfolio aligned with its risk profile. Portfolios are not managed tactically to try to time the markets.
Losses incurred in the sale of securities and other assets provide potential tax benefits for investors. For those enrolled, a systematic and automatic process for tax-loss harvesting provides an investor with a convenient way that may improve total net-of-taxes returns over time. On a daily basis, the Automated Investing Team oversees our tax-loss harvesting algorithm that allows clients to potentially capture tax-deductible losses while seeking to prevent wash sales.
Annually, our Asset Allocation Research Team updates asset-class performance expectations (also known as capital market expectations) to help you stay appropriately diversified while remaining aligned to your risk profile. The long-term expected risk and return of each asset class are inputs, along with the correlations across asset classes, into the process of determining how much of each asset class to include in each portfolio across the risk spectrum. For example, while most portfolios would hold a combination of stocks, bonds, commodities and cash, Conservative portfolios tend to put more emphasis on bonds and cash, while Growth portfolios tend to put more emphasis on stocks.
Within these regular portfolio reviews, our Manager Selection Team selects appropriate ETFs, reviewing and recommending updates when necessary while limiting taxable events. This is a collaborative process with input from Portfolio Management, Trading and Technology Teams.
Our Portfolio Management Team also reviews portfolio weights and holdings prior to adjusting client portfolios. This review is an iterative process of communication with the Trading and Technology Teams, as well as a handful of other advisors. We do this to ensure that any suggested changes can be made efficiently and will be most optimal for your long-term goals. These teams are the pilots for your portfolio while the algorithms behind Schwab Intelligent Portfolios efficiently help keep you on track.
Automated Side: Monitoring & Trading
When your portfolio drifts from its target allocation due to market movements, we automatically rebalance your portfolio so you don't have to. Automated technology rebalances your portfolio more efficiently than humans can. With hundreds of thousands of accounts, it would be a time consuming and potentially inefficient process to have teams of people rebalancing each portfolio manually. Our rebalancing algorithm allows us to simultaneously review drift daily for every portfolio we manage.
Similarly, tax-loss harvesting is done systematically and reviewed daily for all Schwab Intelligent Portfolios clients enrolled in this feature. This opens up opportunities for Schwab Intelligent Portfolios investment professionals to focus on monitoring these automations and researching enhancements.
Our Goal Tracker uses a Monte Carlo simulation to help you project hypothetical performance. This technology helps you monitor how you're tracking toward your goal and if you need to consider adjustments to reach your goal.
Our algorithm helps to remove emotions from investing. When markets experience turbulence, changing your portfolio due to fear of further losses can lead to poor outcomes, such as locking in losses that could be regained in the future. Automated rebalancing within Schwab Intelligent Portfolios accounts helps investors stay on track with their strategic asset allocation plan, including a buy low-sell high discipline as markets fluctuate.
Human + Robo: Efficient decisions in the best interest of clients
Schwab Intelligent Portfolios was designed to include both human oversight and automated elements of portfolio management and robo-advice, to help make your portfolio more efficient and reducing costs. We believe this combination provides synergies which cannot be provided by human- or automated-only portfolio management. Together, these are a vital combination to help clients meet their financial goals.
By Jack Hanna, Senior Specialist with Charles Schwab Investment Advisory, Inc.
1Tax-loss harvesting is available for clients with invested assets of $50,000 or more in their Schwab Intelligent Portfolios account. Clients must enroll to receive this service.
The tax-loss harvesting feature that will be available with Schwab Intelligent Portfolios Solutions™ is subject to limitations which are described on the Schwab Intelligent Portfolios website and mobile application (collectively, the "Website") as well as in the Charles Schwab & Co., Inc., Schwab Intelligent Portfolios® disclosure brochures (the "Brochure"). You should consider whether to enroll in tax-loss harvesting feature based on your particular circumstances and the potential impact tax-loss harvesting may have on your tax situation. Please read the tax-loss harvesting disclosures on the Website and in the Brochure before choosing it. Neither the tax-loss harvesting strategy nor any discussion herein is intended as tax advice, and neither Charles Schwab & Co. Inc. nor its affiliates, including but not limited to Charles Schwab Investment Advisory, Inc., represents that any particular tax consequences will be obtained. For more information please visit the IRS website at www.irs.gov.
2Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium® are designed to monitor portfolios on a daily basis and will also automatically rebalance as needed to keep the portfolio consistent with the client's selected risk profile. Trading may not take place daily.