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by lewisl9029
3376 days ago
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For a different perspective, here's Schwab's response to critics on its decision to keep a mandatory cash component in its robo-advisor offering: https://www.aboutschwab.com/ceo-statement#anchor-copy-ceo-st... I think their reasoning is sound in theory, but it strikes me as suspect that they would not allow even the option to stay fully invested for clients who would prefer to manage the cash component of their portfolio in a bank account where it can actually be spent at moments notice. And it does also strike me as a bit too convenient that their decision to remove this option from clients just happens to directly benefit Schwab's bottom line. Their decision to compose more than half of the equity portion of their portfolio using dramatically higher-cost fundamentals ETFs from Schwab in place of using solely market cap ETFs also triggers similar warning bells for me, however sound the technical reasons for doing so might be:
https://intelligent.schwab.com/public/intelligent/insights/w... That said, I'm curious how Betterment came up with their numbers for their cash drag analysis. If cash drag on the highest end of the spectrum of a portfolio with 30% in cash is supposed to cost investors 0.56%, I'm not sure how they derived the lowest end of a portfolio with 6% in cash to be 0.38%. It seems to me Schwab might not be the only one here guilty of misleading potential clients. Disclaimer: I am a Schwab client, but am not actively using their Intelligent Portfolios offering. I have done a bit of research into it back when it was announced though. |
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They'll keep you in some fund paying 1 bps and turn around and invest it elsewhere. Yes, you want some cash (esp. to the extent it's part of your asset allocation), but no you don't want to use the awful sweep vehicles they default you to.