|Charles Schwab, founder of Charles Schwab Corporation speaking at Charles Schwab Institutional Impact 2007 at the Mandalay Bay Convention Center, Las Vegas, Nevada, United States. (Photo credit: Wikipedia)|
The service is being developed in-house and likely will be free, giving the San Francisco-based discount brokerage pioneer a leg up on a slew of upstart firms known as robo-brokers that charge management fees of 0.15 to 0.35 percent of a client's assets.
It would position Schwab as the first conventional brokerage with its own robo-broker offering. In automated investing plans, clients fill out questionnaires about investment goals and risk tolerances. Their answers automatically determine the portfolios of exchange-traded funds or other assets they buy.
Executives at some large broker-dealers, which typically charge 1 to 3 percent of client assets in managed account programs, have said they do not feel threatened by robo-brokers because they make money offering more sophisticated wealth-planning and investment services to wealthy clients.
But they also want to nurture younger investors to replace affluent but aging Baby Boomers, the bulk of their client base.
Schwab is betting young investors in early stages of wealth accumulation will remain in-house and use more sophisticated advisory services as they prosper or as markets become complicated, one source said. Like other brokerage firms, it receives payments from mutual funds its clients use as well as interest that accumulates on cash held in their accounts.
The automated service is expected to include features such as automatic portfolio rebalancing and tax-loss harvesting that some robo-brokers recently introduced.
Neesha Hathi, head of technology solutions for independent investment advisers who use Schwab services, told Reuters on Thursday the program would likely be introduced this month. She did not comment on details, but a person familiar with the plan said it would be introduced without fees.
In July, Chief Executive Walt Bettinger told investors Schwab was working on "an online advisory solution," but declined to provide details on timing or whether it would build or buy a robo-service.
A Schwab spokeswoman said Friday she could not comment further.