Charles Schwab

Subscription-Based Fee coming to Schwab

Apple, Amazon and Netflix are not the only corporations betting heavily on subscriptions.

The Charles Schwab Corp, an investing pioneer which manages in excess of 3.5 trilling in assets, revealed on Thursday that they are making the switch to a subscription fee financial planning option service.

The Vice President of Digital Advice at Schwab, Cynthia Loh stated during an interview that, “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. Customers have become used to engaging with subscription services.’’

The Schwab Intelligent Advisory, which assists clients with in-depth financial planning and guidance from financial planners, shall begin applying a $300 fee upfront to new customers in addition to a $30 monthly flat rate starting April 1st, versus the current fee of 0.28% on assets. The new fee will be called the Schwab Intelligent Portfolios Premium Service.

Users who have been using the prior Schwab financial services will not need to pay the $300 fee required of new clients. Instead, they will be transitioned into the new pricing model as early as Thursday. However, this will only come into effect is assists are enough for it to be cost-efficient. The Schwab Intelligent Portfolio Service will automatically rebalance and build portfolios with exchange-traded funds along with providing limited guidance on those that qualify for the free service.

It isn’t surprising to see Schwab move over to the subscription-based model as it has become the norm for the technology industry. Companies like Apple, Netflix and Amazon, have made millions through this model with even the smallest of fee’s adding up quickly into substantial revenue. Currently, Schwab holds $37 billion in assets from over 300,000 different accounts, including its robo-adviser service, which accounts for a small amount of its overall assets.

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

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