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Charles Schwab follows Vanguard by pouring cold water on UK robo prospects

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Charles Schwab, the US-based $2.8trn (£2.3trn) wealth manager and broker, says it has no plans to launch a robo-advice service in the UK despite the success of its US offering.

The firm, which offers both a self-directed and advised wealth management service to UK-based clients, manages $11bn of assets in the US through its automated investment tool, Intelligent Portfolios, which is double the amount
managed by competitors such as Betterment.

Speaking to Money Marketing, Charles Schwab UK managing director Kully Samra says there is little hope for such a service in the UK.

He says: “The FCA approached us to understand more on how Intelligent Portfolios works in the US. We thought about launching it in the UK but it is all about scale and is really hard.

“With our product there is no charge for clients; the only charge is the underlying expense ratios for ETFs or cash.

“The reason it works very well in the US is because there are features like tax-loss harvesting, and with that you have to deeply understand whatever the tax regime is.

“Frankly, we don’t fully understand the UK tax regime to build it into
the service. We’d have to build it from scratch and we don’t think there is momentum or scale at the moment.”

The comments echo Vanguard’s conversations with Money Marketing to the effect that the ‘pure’ robo-advice model prevalent in the US could not work in the UK due to FCA regulation and the role of regulated advice.

Money Marketing can reveal Charles Schwab will be launching an advised offering for UK investors to access the US market this year, which will include a managed account.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Well as I have said before:

    Robo advice is to financial services what a rubber dolly is to sex. It might work, is certainly cheaper, but it definitely isn’t the real thing. Would you really want to try it?

    It now seems that the large operators are starting to concur. From what Schwab is reported to have said it appears that their US offering is limited to ETFs and cash – about as useful as a bicycle for a fish in the UK.

  2. Advisers are now saved by the regulator? The Regulator is the Adviser’s hero (inadvertently or otherwise)!

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