Investment Product and Service Launches

Principal Financial Group launches the Principal Guaranteed Option, while Charles Schwab introduces subscription pricing for robo-advice. 

Principal Financial Group has launched the Principal Guaranteed Option (PGO), a new addition to its suite of fixed income investment options focused on capital preservation and return. The Principal Guaranteed Option is said to host a crediting rate at 3.05% while providing more choice and flexibility to advisers and plan sponsors as they determine a fixed income strategy for their retirement plan.

“Whether navigating volatile markets or needing more predictability and stability in a portion of a participant’s long-term savings, the new Principal Guaranteed Option extends our fixed income offering to address these needs,” says Jerry Patterson, senior vice president of Retirement and Income Solutions at Principal. “It is one more option that enables plan participants to design an investment portfolio focused on outcomes that are important to them.” 

According to Principal, the investment option seeks to preserve capital and provide a guaranteed credit rate over a full interest rate cycle; allows customers to maintain an interest in PGO if the plan moves to a new recordkeeper; is available for 401(k), 401(a), 403(b) and governmental 457(b) plans; and has 14 rate levels available.

“Advisers and plan sponsors want choice and flexibility as they look to select a fixed income investment option that meets the diverse savings needs and objectives of retirement plan participants,” adds Patterson. “We’ve delivered that with PGO and will continue to look for more ways to help people reach their financial goals and feel more confident about their future.”

Charles Schwab Introduces Subscription Robo-Advice Pricing

Charles Schwab is moving to a new subscription pricing model for its Schwab Intelligent Advisory service and renaming the service as “Schwab Intelligent Portfolios Premium.”

Schwab Intelligent Portfolios builds, monitors, and automatically rebalances a diversified portfolio of low-cost exchange-traded funds (ETFs) based on a client’s goals and provides 24/7 help from Schwab service professionals. This service is designed as a fully digital end-to-end experience, but clients also have access to professionals who can help with a range of topics including client goals, risk tolerance, and portfolio allocation.

According to the firm, this development will not come along with pricing changes to Schwab Intelligent Portfolios, the firm’s automated investing service. The 0.28% advisory fee clients previously paid for Schwab Intelligent Advisory, now called Schwab Intelligent Portfolios Premium, has been replaced with an initial one-time $300 fee for planning, and a $30 monthly subscription ($90 billed quarterly) that does not change at higher asset levels.

“Cost and complexity are two of the biggest roadblocks to accessing financial planning, and our goal is to break down those barriers,” says Cynthia Loh, Charles Schwab vice president of digital advice and innovation. “These changes are a result of client feedback and our commitment to meet consumer expectations for simplicity, transparency and value.”

The firm says it expects clients will react positively to this new approach, as subscription-based pricing has become “second nature.”

“This new pricing approach is part of our focus on making the investing and planning experience easier, more modern, and more approachable,” Loh adds.

Clients in Schwab Intelligent Portfolios and Schwab Intelligent Portfolios Premium pay the operating expenses on the ETFs in the portfolio, which includes a combination of Schwab ETFs and funds from third party providers. Based on a client’s risk profile, a portion of the portfolio is placed in an FDIC-insured deposit at Schwab Bank. Some cash alternatives outside of the program pay a higher yield, the firm says.