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Schwab adopts subscription model for financial planning

Financial piggy bank decisions
Schwab Intelligent Advisory, which includes unlimited guidance from a certified financial planner and an in-depth financial plan, is charging new customers an upfront fee of $300 and a flat $30 a month, instead of the previous 0.28% of assets.
(Peter Dazeley / Getty Images)
Bloomberg

It’s not just Apple Inc. that’s betting big on subscriptions.

Charles Schwab Corp., the low-cost investing pioneer that now handles more than $3.5 trillion in assets, is switching to a subscription-based financial planning option to its digital advisory service that offers more hands-on help.

“We are making this change on behalf of our clients to be simpler and more transparent, but we’re also paying attention to the broader landscape,” Cynthia Loh, vice president of digital advice at San Francisco-based Schwab, said in an interview. “Customers are used to engaging with subscription services.”

On April 1, Schwab Intelligent Advisory, which includes unlimited guidance from a certified financial planner and an in-depth financial plan, began charging new customers an upfront fee of $300 and a flat $30 a month, instead of the previous 0.28% of assets. The hybrid robo service is being renamed Schwab Intelligent Portfolios Premium.

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Current users won’t have to pay the $300 fee, and they’ll be transitioned to the new pricing model, but only once they have enough assets to make it more cost-efficient for them, at around $125,000.

The free version of the service, Schwab Intelligent Portfolios, which automatically builds and rebalances exchange-traded fund portfolios as well as offering more limited guidance, will continue charging no advisory fee.

The subscription model has become increasingly popular in the technology industry. Netflix Inc., Amazon.com Inc. and Apple have many millions of users, so even small monthly fees can quickly add up to significant revenue. Schwab has 300,000 accounts and $37 billion across its digital offerings, including the robo-advisor service, accounting for a small portion of its assets.

“There aren’t many firms that have tens of millions of customers,” said Devin Ryan, an analyst with JMP Securities. “That being said, for certain parts of the industry that are maybe tech-driven, incredibly scalable and could potentially service millions of people, absolutely I could see there being value to a subscription model.’’

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