Respected online broker E-Trade entered the growing robo-advisor market in 2016 with a service solidly focused on the customer. Formerly known as E-Trade Adaptive Portfolios, the service was rebranded E-Trade Core Portfolios in late 2017 but it retains its high level of service — including access to a dedicated team of registered financial consultants.
The rebranded service introduced ETFs with lower expense ratios, a clear positive for investors, and a new promotional bonus is also a nice plus. If there are obvious drawbacks, they are that E-Trade has an account minimum of $5,000 and not much of a tax strategy, but those aren’t dealbreakers, given the robo’s positives.
- Management fee: 0.30%
- Account minimum: $5,000
- Limited-time promotion: No advisory fee for one year
E-Trade Core Portfolios is best for:
E-Trade Core Portfolios at a glance
|Account management fee||0.30%|
|Investment expense ratios||Expenses range from 0.03% to 0.11%|
|Account fees (annual, transfer, closing)||No extra fees|
|Portfolio mix||Offers eight asset classes, plus cash, socially responsible investing, smart beta and tax-sensitive portfolios|
|Accounts supported||• Individual and joint non-retirement accounts
• Roth, traditional and rollover IRAs
• Custodial accounts
• 401(k) and Roth 401(k)
|Tax strategy||Not offered|
|Automatic rebalancing||Balanced as the account drifts from target allocations, and free on all accounts|
|Customer support options||Registered Financial Consultants available for Adaptive Portfolio clients by phone Monday - Friday, 8:30 a.m. to 8:30 p.m. Eastern; live chat support 24/7.|
|Promotion||No advisory fee for one year (limited-time promotion)|
Where E-Trade Core Portfolio shines
Investor risk profile: Each customer — or potential customer, because the profile questionnaire is available without logging in — is taken through a series of nine questions designed to assess risk tolerance. The questionnaire is one of the most thorough we’ve seen. E-Trade poses queries from multiple angles to try to figure out how the investor will tolerate various levels of risk and market fluctuations.
Investments: Once the questionnaire is complete, the service assigns the investor a risk profile. Without creating an account, you can loosely see how your portfolio would be allocated. For example, in the graphic below the profile allocates 80% to equities, specifically large-cap funds, small-cap blend funds, and developed and emerging market funds. The rest of the portfolio is allocated to fixed-income funds or cash. All portfolios maintain a 4% cash allocation.
As part of its rebranding, E-Trade has really focused on lower-cost ETFs — and it shows. Where an investor might have paid an average of 0.20% in an all-ETF portfolio before, now its ETFs’ expenses weigh in at a svelte 0.03% to 0.11%. It’s a significant cost savings that’s better for investors in the long run.
After an account has the minimum required balance, investors can see the specific funds used, along with the expense ratios that each charges. E-Trade declined to share a list of funds used or how many asset classes are covered, but none of the funds is proprietary. As at other robo-advisors, the ETFs at E-Trade come from iShares, Vanguard and State Street.
The various risk profiles reveal exposure to large-cap funds, small-cap funds, international and emerging markets equity funds, value-oriented equities as well as corporate and government bonds.
Customer support: E-Trade’s service doesn’t come with dedicated advisors like similar robo-advisor services offered by Vanguard Personal Advisor Services or Personal Capital, though these services require much higher minimum balances (at least $50,000). However, Core Portfolios investors do have access to a team of registered financial consultants. E-Trade has long excelled in customer support, as we noted in our full review of the company’s brokerage services, with impressive educational resources.
Also notable here is the access that clients have to customer service. Not only are consultants available from 8:30 a.m. to 8:30 p.m. Eastern time, E-Trade also offers 24-hour availability by chat for those pressing middle-of-the-night questions.
Automatic rebalancing: The service automatically rebalances all accounts based on drift, or when the portfolio shifts out of its target allocation. E-Trade’s method compares client portfolio allocations against target-allocation drift parameters each day and submits trade orders as necessary to bring the allocation back in line. This daily check-in is noteworthy because some robo-advisors may rebalance only once a quarter.
Integration with E-Trade brokerage accounts: The $5,000 minimum applies specifically to an E-Trade Core Portfolios account, but existing E-Trade clients can convert their brokerage accounts to managed accounts by simply enrolling in the program. You don’t need to sell any securities before doing so — the robo-advisor will do that for you by liquidating holdings that aren’t in your recommended portfolio, commission-free. (You may, however, have capital gains or losses in the process.)
Management fee: The advisory fee for E-Trade’s service is 0.30%. As with other robo-advisors, that fee is charged in addition to the fund expense ratios, making the total cost less than about 0.40% for the portfolio. It’s a management fee that falls even with or slightly higher than most other robo-advisors.
Promotion: E-Trade’s current promotion is one of the best we’ve seen from a robo-advisor, but only if you’re able to move at least $10,000 into the account (not including money already held with the broker). Move that much in new money to Core Portfolios and you’ll receive a $100 bonus. That bonus scales up as you bring more money to the account (see table above), and could cover several years’ worth of E-Trade’s advisory fees, so it can be a low-cost way of trying the service.
Where E-Trade Core Portfolios falls short
Account minimum: While E-Trade has lowered its account minimum from $10,000 to $5,000, that’s still high in today’s robo-advisor landscape, which has moved rapidly toward lower minimums. But recall that you’re getting highly regarded customer service as part of that higher commitment.
Vanguard and Charles Schwab have proven they can easily shift client assets in-house; both were able to attract plenty of existing customers to their new robo-advisory services. E-Trade likely will see a similar shift, but its high minimum will probably make it harder to attract new assets.
Tax strategy: The company doesn’t offer tax-loss harvesting, a service that can significantly reduce capital gains taxes: In taxable accounts, the practice involves selling losing investments to offset the gains from winners. It’s widely available among robo-advisors, often for free, though some advisors do impose an additional balance requirement before the service takes effect. Instead, E-Trade offers a “tax-sensitive” portfolio for taxable accounts, meant to minimize Uncle Sam’s bite.
Is E-Trade Core Portfolios right for you?
E-Trade has created a solid contender in the robo-advisor arena, and it’s gotten only better with the re-focused service, retaining its strong parts (customer service and advising) while bolstering weaker points (expense ratios). Current E-Trade clients especially may want to give Core Portfolios a go, if they’re looking to see what all the fuss is about. And if they can bring some new money into the fold and earn that attractive promotion and offset a good bit of the management fees — well, that’s just gravy. While E-Trade’s management fee (0.3%) is just a bit above that at two robo heavies — Wealthfront (0.25%) and Betterment (0.25%) — its funds’ very competitive expense ratios put it even with these two rivals on overall costs. But if a low or no account minimum is a dealbreaker for you, you’ll have to head somewhere else.