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
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Pros & Cons
Low investment expense ratios.
Competitive management fee.
Niche account types.
High account minimum.
Compare to Other Advisors
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:
Large account choice.
Socially conscious investors.
TD Essential Portfolios at a glance
$5,000. Investors who sign up for recurring deposits can open an account with $500.
Account management fee
Investment expense ratios
Core portfolio: 0.06% - 0.07%. Socially aware portfolios: 0.10% - 0.17%.
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.
• 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).
Free tax-loss harvesting on all accounts.
Annually and on an as-needed basis
Human advisor option
Customized tips based on account activity to help clients reach goals.
Bank account/cash management account
Customer support options (includes website transparency)
Email and chat support Monday-Friday 7:30 a.m.-7 p.m. Eastern (excluding market holidays).
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%.
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.
The service then serves up predictions for expected volatility for each portfolio, along with the probability of accumulating various account balances.
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.