With a proliferation of robo-advisors in the market, major brands are beginning to innovate in an effort to stand out. Charles Schwab has adapted its hybrid robo-advice service to a subscription model, and other competitors will follow suit, says GlobalData.
Charles Schwab, one of the first large US investment giants with a robo-advice offering announced it will be moving to a new subscription-based hybrid robo-advisor for Schwab Intelligent Advisory in March 2019, and renaming the service Schwab Intelligent Portfolios Premium. This service uses client goals to build a portfolio of low-cost ETFs, and provides access to a certified financial planner for $30 a month following a one-time planning fee of $300.
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Adapting the charging model of a wealth management service may not sound like a major innovation, but it addresses some key barriers to investing among modern consumers.
According to GlobalData’s 2018 Emerging and Mass Affluent Survey, 43% of US investors are easily flustered when things are unnecessarily complicated. With complexity and opaque costs among the issues for potential investors, Charles Schwab is aiming to address this through a simplified approach. Customers will now find it easier to plan their costs for the month, year, and longer-term as the set rate reduces complexity around fees. This represents a marked change from a percentage-based fee model, on which the service was previously based.
In addition, younger consumers have already shown themselves to be comfortable with digital services based on subscription fees. For millennials, subscriptions are a staple of everyday life, covering everything from Spotify, Amazon Prime, and Netflix to renting extra iCloud space.
Robinhood and Acorns both operate a subscription model, meaning Charles Schwab is not the first wealth manager to offer a subscription-based robo-advisor. However, it is the largest. If this proves to work at scale for the likes of Charles Schwab, it will be an attractive business model for any major wealth manager with a hybrid robo-advice offering. Expect more wealth subscriptions being offered by wealth managers around the world.
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