TD Ameritrade Essential Portfolios Review 2020: Pros, Cons and How It Compares

TD Ameritrade Essential Portfolios offers automated portfolio management that's in line with services of other robo-advisors. The standouts: A lengthy list of account types and a socially responsible portfolio choice.

Arielle O'SheaJanuary 2, 2020

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Our Take

4.0

NerdWallet rating 

The bottom line: The robo-advisor from TD Ameritrade charges a 0.30% annual management fee and requires a $5,000 minimum investment. The service will most appeal to existing TD Ameritrade customers.

TD Ameritrade Essential Portfolios

TD Ameritrade Essential Portfolios

Fees

0.30%

management fee

Account Minimum

$5,000

Promotion

None

no promotion available at this time

Pros & Cons

Pros

  • Low investment expense ratios.

  • Competitive management fee.

  • Niche account types.

  • Morningstar-built portfolios.

Cons

  • Small portfolios.

  • High account minimum.

Compare to Other Advisors

Betterment
Wealthfront
Fees

0.25%

management fee

Fees

0.25%

management fee

Account Minimum

$0

Account Minimum

$500

Promotion

Up to 1 year

of free management with a qualifying deposit

Promotion

$5,000

amount of assets managed for free

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Full Review

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 — is a competitive player in the ever-expanding world of robo-advisors.

As the name implies, Essential Portfolios focuses on providing just the essentials — a diversified portfolio built with a minimum number of exchange-traded funds. (Just seven to eight funds covering eight asset classes, versus the 10 or more ETFs 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. Investors who set up recurring deposits can open an account for a reduced minimum of $500.

TD Ameritrade Essential Portfolios is best for:

  • Hands-off investors.

  • Large account choice.

  • Low-cost ETFs.

  • Socially conscious investors.

TD Essential Portfolios at a glance

Account minimum

$5,000. Investors who sign up for recurring deposits can open an account with $500.

Account management fee

0.30%.

Investment expense ratios

Core portfolio: 0.06% - 0.07%. Socially aware portfolios: 0.10% - 0.17%.

Account fees

None.

Portfolio mix

Portfolios contain 7-8 ETFs covering 8 asset classes; clients can select a secondary ETF if they have a restriction that prevents them from owning one of the primary ETFs.

Accounts supported

• Individual and joint nonretirement 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 strategy

Free tax-loss harvesting on all accounts.

Automatic rebalancing

Annually and on an as-needed basis

Human advisor option

None

Tools

Customized tips based on account activity to help clients reach goals.

Bank account/cash management account

Not available

Customer support options (includes website transparency)

Email and chat support Monday-Friday 7:30 a.m.-7 p.m. Eastern (excluding market holidays).

Promotion

None

Where TD Ameritrade Essential Portfolios shines

Morningstar-built portfolios: 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. 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.

Morningstar’s guidance here can help investors feel confident that the funds used — mainly from iShares and Vanguard — were chosen because they’re a good fit for the portfolios and risk goals. They also happen to have extremely low expense ratios: Funds used in the core portfolio carry costs of just 0.06% to 0.07%.

Competitive management fee: This is another key fee for investors to compare. TD Ameritrade Essential Portfolios' 0.30% management fee puts it in line with other robo-advisors launched by online brokers: E-Trade Core Portfolios and Vanguard Personal Advisor Services both charge the same; Fidelity Go's fee — which includes investment expenses — is 0.35% and Merrill Edge Guided Investing charges 0.45%.

That said, it is higher than the two most popular independent offerings: Betterment and Wealthfront both charge a 0.25% management fee for their basic offerings.

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.

Socially aware portfolio choice: Investors interested in aligning their investment choices with their values will appreciate TD's Socially Aware Portfolios offering as an alternative to the core portfolios. Investments are chosen based on "ESG" principles (ETFs composed of companies that score high on environmental, social and governance factors). Like the core portfolios, the exact investment mix reflects the client's risk tolerance (conservative, moderate, moderate growth, growth and aggressive). Just be aware the expense ratios on funds used in these portfolios is higher than the core portfolio expenses: 0.10% to 0.17%.

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.

screen-shot-2016-11-08-at-11-48-50-am

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

screen-shot-2016-11-08-at-11-49-45-am

Where TD Ameritrade Essential Portfolios falls short

High account minimum: For a straight digital robo-advisor, a $5,000 account minimum is on the high end of the spectrum — there are services that require no minimum investment. However, new this year, TD Ameritrade is allowing investors to open an account with $500 if they set up recurring deposits.

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 seven or eight 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, and says the service allows a secondary ETF choice for clients who have a restriction that prevents them from owning one of the primary ETFs.

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 (tax-loss harvesting) and portfolios (low investment expense ratios) are comparable to other services on the market.

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

Dayana Yochim contributed to this review.