TD Ameritrade Essential Portfolios Review

TD Ameritrade was one of the pioneers of the low-cost investing movement that accompanied the rise of the internet. However, for much of its history, TD Ameritrade has focused on do-it-yourself investors who want to choose their own stocks, bonds, and mutual funds.

In recent years, TD Ameritrade joined the robo-advisor movement, which offers many of the benefits of customized investment advice without the high cost of hiring a financial advisor. The company's robo-advisor product is TD Ameritrade Essential Portfolios, and in this review, we'll look at how the platform works, its pros and cons, and whether it’s a good choice for you.

Excellent portfolio selection: TD Ameritrade Essential Portfolios offers one of the most extensive selections of portfolio options of any robo-advisor. Investors can choose from five Socially Aware Portfolios which focus on environmentally and socially friendly companies, as well as a number of core portfolio options.

Tax-loss harvesting: This is one of the biggest differentiators of TD Ameritrade Essential Portfolios. Few other robo-advisors offer free and automatic tax-loss harvesting, and those that do generally only offer it for large accounts. Schwab Intelligent Portfolios, for instance, offers tax-loss harvesting to clients with $50,000 or more of invested assets. This can save investors hundreds of dollars in taxes.

Large branch network: If you'd rather get customer service help in person than over the phone or through email, TD Ameritrade has more than 275 branches across the United States. Few other brokers can match this physical presence.

Low-cost ETFs: While TD Ameritrade's management fee isn't the lowest in the industry, the low-cost ETFs it uses to construct client portfolios helps make up for it. ETFs in the core portfolios have expense ratios of just 0.06%-0.07%, and even the 0.10%-0.17% expense ratios charged for its Socially Aware Portfolios are rather cheap.

Frequent rebalancing: Essential Portfolios automatically rebalances client portfolios annually and on an as-needed basis. Some competitors only rebalance assets at predetermined intervals, such as every six months.

Customer service: You can contact TD Ameritrade by phone, email, text, and chat through Facebook and Twitter.

Many account types: Unlike many of TD Ameritrade's robo-advisor competitors, Essential Portfolios supports a long list of account types. In addition to individual and joint brokerage accounts, you can open an Essential Portfolios IRA (traditional, Roth, rollover, SEP, or SIMPLE), Coverdell ESA, trust, solo 401(k) (traditional or Roth), custodial, or business account. Virtually every type of investment account can be accommodated.

Management fee could be lower: TD Ameritrade Essential Portfolios charges a 0.30% annual account management fee. This means you'll pay $3 in management fees for every $1,000 you’ve invested. This isn't the highest in the industry, and TD Ameritrade offers some impressive features, but it's on the upper end of the spectrum of our favorite robo-advisors.

High minimum without future commitments: TD Ameritrade Essential Portfolios requires investors to deposit at least $5,000 to get started or $500 plus a commitment to make automatic deposits. That's on the high end of the robo-advisors we cover, and could be a turn-off for newer investors who may not have a lot of capital to commit.

Access to human advisors: Unlike some of its competitors, TD Ameritrade Essential Portfolios doesn't give clients access to human financial advisors. It does have Portfolios Specialists to answer questions about the service, but if you want advice for things like saving money to buy a house or creating a budget, you might be better off looking elsewhere.

Like most robo-advisors, TD Ameritrade Essential Portfolios asks new clients to fill out a short questionnaire to determine risk tolerance and investment goals. Based on these results, you get a recommended portfolio. You can accept the recommendations, modify your risk level, or choose a specific approach (such as the Socially Aware Portfolios).

Services offered

TD Ameritrade Essential Portfolios offers standard robo-advisor services such as automatic portfolio rebalancing and professionally designed investment portfolios. In addition, it offers a few stand-out services. For example, TD Ameritrade Essential Portfolios is one of the only robo-advisors that offers free and automatic tax-loss harvesting, and it's the only one on our best robo-advisors list to offer it to clients of all account sizes. This is a strategy by which a robo-advisor strategically sells investments that have declined in value and re-invests this capital elsewhere to offset taxable gains on other investments. If you have a larger account or are in one of the higher tax brackets, this feature alone can more than pay for TD Ameritrade's 0.30% management fee.

TD Ameritrade is one of a few robo-advisors offering socially aware portfolios, but offers a wider selection than most, and uses some of the cheapest socially responsible ETFs to construct these portfolios.

Pricing and fees

When it comes to pricing, TD Ameritrade Essential Portfolios isn't the cheapest in the business, but it still delivers good value considering its features. Here's a breakdown of the cost structure:

There are two types of support clients of a robo-advisor could need -- investment advice from a human being, and help with technical issues. No access to human financial advisors is included with TD Ameritrade Essential Portfolios. TD Ameritrade offers higher-level services that include personalized financial advice from advisors, but it's not a part of the basic robo-advisor service.

On the other hand, TD Ameritrade has excellent customer service when it comes to general account help. Not only is there support by phone and email, you can obtain help via Facebook and Twitter messaging.

There's no perfect robo-advisor for everyone, and there are alternatives to TD Ameritrade Essential Portfolios that could be better for certain investors.

One of the main shortcomings of Essential Portfolios is the lack of access to human financial advisors. If this is a feature you want, it might be smart to check out Ellevest, which offers unlimited access to financial advisors and a comparable fee structure. However, there are some features such as tax-loss harvesting that you won't find, so it comes down to what features matter the most to you. Better yet, check out all of our favorite robo-advisors to see which best meets your needs.

• You have at least $500 to invest, or $5,000 if you don't want to commit to recurring deposits.
• You want to invest in a socially responsible manner at a minimal cost.
• You don't need to speak with a human financial advisor.
• You are concerned by the tax implications of your investments.
• You want to open a specialized type of account, such as a solo 401(k), a trust, or an account for a business entity.