Schwab Scraps its Premium Robo Advisor Platform

Core Viewpoint - Schwab is shutting down its premium service, Schwab Intelligent Portfolios Premium, while continuing its core online-only service, Intelligent Portfolios, which has a $5,000 minimum and no fees. This reflects a trend among traditional banks moving away from hybrid robo-advisory services [2][4]. Group 1: Company Actions - Schwab's decision to close its premium service is the first major instance of a bank eliminating just its hybrid offering rather than discontinuing its entire robo-advisory service [2]. - The non-premium Intelligent Portfolios service has accumulated over $80 billion in assets since its launch in 2015, indicating its success compared to the premium tier [4]. Group 2: Industry Trends - The closure of Schwab's premium service follows similar moves by other banks like UBS and US Bank, highlighting a broader trend of traditional banking institutions reassessing their robo-advisory strategies [2][4]. - Hybrid offerings that combine human and digital advice are noted to be more challenging to scale, which may contribute to the decision to focus on the core digital-only service [3][4]. Group 3: Financial Insights - Schwab's basic service maintains a high cash allocation of around 10%, which is used to generate interest for the bank, rather than charging direct fees [4]. - The business model of generating cash through high allocations is critiqued for potentially holding back performance, suggesting a preference for a more transparent fee structure based on assets under management (AUM) [4].