Charles Schwab is the 800-pound gorilla that is going to shake up the software-based investment services dominated by Betterment and Wealthfront, both of which unfortunately are only available in the US as of now.
What Charles Schwab is offering –
- Invest in a portfolio of ETFs that will be automatically rebalanced
- Fund account with recurring deposits
- No trading commission
- No advisory fee
- No service fee
- You just pay the normal expense ratios on the underlying ETFs.
To an index investor, all you need to do is to select the ETFs you want, sit back, and relax. They will do the rest of the work for you. At no extra cost.
Really exciting development if you ask me, and perhaps this will spur the other big boys to take action as well. At the moment, Charles Schwab does have some presence here in Singapore in the form of OptionsXpress.
Additional reading by CNBC dated March 2015 raises some important points about the portfolio.
Perhaps the biggest source of criticism is the company’s decision to allocate significant parts of the portfolios — at least 6 percent and as much as 30 percent of an individual’s money — to cash, held in an Federal Deposit Insurance Corporation-insured account. The cash allotment will often be larger than many financial advisers recommend. The cash component will make money for Schwab, which will earn revenue on the difference between the interest it pays to customers (currently 0.10 percent; it will fluctuate based on a national average of money-market accounts calculated by RateWatch) and what it can earn on that money invested elsewhere.