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TD Ameritrade Essential Portfolios Review 2018

Jan. 5, 2018
Advisors, Investing
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TD Ameritrade is the behemoth behind one of our top picks for best online brokers. So it’s no surprise that its service for the hands-off set — TD Ameritrade Essential Portfolios — also gets a nod in our roundup of best robo-advisors.

As the name implies, TD’s robo-advisory is focused on providing just the essentials — a diversified portfolio built with a minimum number of ETFs (just five ETFs versus the 10 or more most other services draw from). The service’s $5,000 minimum investment requirement puts it in the middle of the pack among peers, but its 0.30% management fee is competitive.


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Essential Portfolios

Quick Facts

  • Management fee: 0.30%
  • Account minimum: $5,000

Essential Portfolios

TD Ameritrade Essential Portfolios is best for:

  • TD Ameritrade loyalists
  • Hands-off investors
  • Large account choice
  • Low-cost ETFs

TD Ameritrade Essential Portfolios at a glance

Overall

Account management fee0.30%
Investment expense ratios0.06% to 0.08%
PortfolioPortfolios include five funds from Vanguard and iShares, plus cash
Account minimum$5,000
Account fees (annual, transfer, closing)$75 full transfer out fee. Accounts that qualify for TD Ameritrade Apex — balances of $100,000 or more — are exempt from this fee
Accounts supported• Individual and joint non-retirement accounts
• Roth, traditional, SEP, SIMPLE and rollover IRAs
• Coverdells
• Trusts
• Solo 401(k)s and Solo Roth 401(k)s
• Nonprofit corporation accounts
• Profit-sharing plans
• UGMA/UTMA
• Business accounts with $100,000 minimum (S Corp, C Corp, LLC, Partnership, Unincorporated)
Tax strategyFree tax-loss harvesting for all accounts
Automatic rebalancingFree "drift rebalancing" on all accounts
Customer support24/7 phone, live chat and email support

Where TD Ameritrade Essential Portfolios shines

Morningstar-built portfolios: Unlike other online brokers that have launched advisors, TD Ameritrade doesn’t have its own funds, so the funds here are nonproprietary. They were recommended by Morningstar Investment Management, a well-respected investment research and advisory firm. As online brokers have entered the robo-advisory field, some have used their own funds to build portfolios, effectively lining their pockets twice, with fund expenses and management fees.

Morningstar’s guidance here can help investors feel confident that the funds used were chosen because they’re a good fit for the portfolios and risk goals. Essential Portfolios uses iShares and Vanguard ETFs.

Competitive management fee: TD Ameritrade Essential Portfolios’ 0.30% management fee puts it in line with other robo-advisors launched by online brokers: E-Trade Adaptive Portfolio and Vanguard Personal Advisor Services both charge the same; Fidelity Go’s all-in fee is 0.35% but includes investment expenses.

That said, it is higher than the two most popular independent offerings: Betterment charges 0.25% for its digital offering; Wealthfront charges 0.25% but manages the first $10,000 for free.

Account choice: This is the longest list of account types we’ve seen from a robo-advisor, including business accounts, which are rarely managed by robo-advisors. No matter what kind of account you’re looking for, Essential Portfolios probably manages it.

Free tax-loss harvesting: Tax-loss harvesting is a popular feature from robo-advisors that attempts to limit the tax impact of taxable accounts by selling losses to offset gains. When TD launched its robo-advisory in 2016, tax-loss harvesting was not offered as part of the service. Today it is a free service offered to all Essential Portfolio clients.

Thoughtful onboarding process: Like other robo-advisors, Essential Portfolios sends clients through an initial questionnaire to gauge risk tolerance, time horizon and investment goals, which are then used to recommend one of five ready-made portfolios. The series of questions attempts to assess the client’s general financial picture, asking how many months’ worth of income are available in savings and whether you plan to make withdrawals from the portfolio before reaching your goal.

The investor can also toggle through various portfolio choices, viewing the recommendations for various levels of risk tolerance before selecting one.

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The service then serves up predictions for expected volatility for each portfolio, along with the probability of accumulating various account balances.

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Where TD Ameritrade Essential Portfolios falls short

Small portfolios: These are bare-bones portfolios — that’s where the name of the service draws from, because only the essentials are included — with only five ETFs per offering; other advisors cover 10 or more asset classes. The funds that are included cover domestic equities, international equities, emerging market equities, domestic fixed income and international fixed income, along with a small allocation to cash.

TD Ameritrade says that it believes the portfolio is well-diversified, but clients who want a greater degree of customization and diversification might be better suited to their other digital advisory offering, TD Ameritrade Selective Portfolios, which offers self-guided advice paired with human interaction. That service includes a greater number of asset allocation models constructed of ETFs or mutual funds — also selected by Morningstar — and covers more asset classes.

Is Essential Portfolios right for you?

The field of robo-advisors has gotten crowded in recent years to the point where many of these services are beginning to look the same. With Essential Portfolios the pricing (0.30% management fee), service offerings (free tax-loss harvesting) and portfolios (low investment expense ratios) are comparable in relation to other services on the market.

The standout feature — what you won’t find at most other robo-advisors — is the exhaustive list of account types. In all other ways Essential Portfolios is an all-around solid option and a natural choice if you’re an existing TD Ameritrade customer looking for a hands-off digital solution.

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.

Updated Jan. 5, 2018