TradeKing Advisors has seen rapid changes since its launch in 2014, all of them benefiting the consumer. The management fee and account minimum are now significantly lower: Management costs just 0.25% — or $1 a month for balances under $5,000 — and investors can open an account with $500.
The company also brings a diversified portfolio of up to 17 asset classes and a range of account types, including business accounts rarely offered by a robo-advisor. TradeKing Advisors accounts integrate with TradeKing, a well-respected online broker. Both brands were purchased by Ally Financial in 2016.
- Management fee: $1/month for balances under $5,000; 0.25% annual fee on balances of $5,000 or more
- Account minimum: $500
Jan. 17, 2017
TradeKing Advisors is best for:
- Business accounts
- Existing TradeKing online broker customers
- Hands-off investors
- Automatic rebalancing
TradeKing Advisors at a glance
|Account management fee||$1/month for balances under $5,000; 0.25% annual fee on accounts of $5,000 or more.
|Investment expense ratios||Expense ratios average 0.17%|
|Portfolio||ETFs and ETNs from up to 17 asset classes|
|Account fees (annual, transfer, closing)||$50 IRA closing fee; no fee to close brokerage account|
|Tax strategy||Not offered|
|Automatic rebalancing||Free on all accounts|
|Customer support||Phone, email and live chat support Monday-Friday 8 a.m.-6 p.m. Eastern|
Where TradeKing Advisors shines
Investments: TradeKing Advisors has a relationship with Ibbotson Associates, the registered investment advisor arm of Morningstar. Although TradeKing Advisors is only about 3 years old and manages just $13 million in assets, Ibbotson Associates has more than $105 billion in assets under management and a proven track record. The company reviews and updates the TradeKing Advisors investment portfolios, which are constructed of exchange-traded funds and exchange-traded notes that carry an average expense ratio of 0.17%.
New customers are directed to an assessment. The questions, developed by Ibbotson, determine an investor’s risk tolerance and goals and help the firm select an investment strategy for the client. The questions gauge how comfortable investors are with large portfolio fluctuations and what their investment time horizon is. The assessment then suggests a portfolio, with details about the asset allocation.
TradeKing Advisors offers five portfolio choices, covering both conservative and aggressive options with up to 17 asset classes, including domestic and foreign fixed-income securities, equities and real estate. All portfolios are monitored daily and automatically rebalanced as needed.
Integration with TradeKing: Current TradeKing self-directed account holders can open a TradeKing Advisors account and easily view all of their accounts in one place. The platform is also mobile-responsive and consistent across devices. You cannot, however, combine self-directed and managed accounts, and TradeKing Advisors’ minimum balance requirements are separate from any assets held at TradeKing.
Business accounts: TradeKing Advisors offers account options that many other robo-advisors don’t, including LLC, partnership, sole proprietorship and corporate accounts.
Where TradeKing Advisors falls short
Management fees: We’d say this walks the line between being a pro and a con, depending on your account balance. TradeKing Advisors has nudged its fees down considerably since the service launch. At balances of $5,000 or more, the current 0.25% annual advisory fee is in line with what other robo-advisors charge. In fact, when compared with robo-advisory offerings from fellow online brokers, it’s actually on the low side.
But it’s important to point out that the $1 a month fee charged to account balances below $5,000 can be expensive when calculated as a percentage of assets under management. For clients who invest the $500 minimum, the fee works out to an annual charge of 2.4%. Only at an account balance of $4,800 does the service’s flat fee break even with the 0.25% annual management fee.
TradeKing Advisors clients with balances of $5,000 or more can also add a feature called Risk Assist to their account, which tacks on an additional 0.50% annual fee, bringing the total yearly management cost to 0.75%. That’s a very high price for peace of mind. Risk Assist automatically shifts asset allocation away from equities and into fixed-income ETFs during severe market declines like the 2008 recession.
As the market bounces back, the allocation will as well, gradually shifting back into equity ETFs. This is an optional feature, so it’s not really a negative; however, it adds a significant cost to the management fee, and investors with a long time horizon would be wise to simply stay the course during a market downturn.
Cash holdings: Investors with TradeKing Advisors will find uninvested cash in their portfolios — between 1% and 6%, depending on the portfolio’s allocation. The advisor does this to avoid having to sell investments to cover management fees and because cash is a part of some allocations. Investors with greater risk tolerance may prefer a robo-advisor that invests in fractional shares, such as Betterment.
Tax-loss harvesting: Or rather, the lack thereof. The company doesn’t offer this feature, which is standard at many robo-advisors, including several that charge the same management fee as TradeKing Advisors.
The bottom line
That depends a great deal on what kind of account you’re interested in and how much money you have to invest. The service is best suited to retirement or business accounts with $5,000 or more, or loyal TradeKing customers who want to house a managed and a trading account under one roof.
At amounts under $5,000, the flat fee can be high when calculated as a percentage of assets under management, and the lack of tax-loss harvesting will be an issue for investors with taxable brokerage accounts.
Updated Jan. 24, 2017.