2019 Robo-Advisor Awards
E*TRADE Core Portfolios won an award in the following category:
E*TRADE got into the robo-advisory space in 2016 with a product it called Adaptive Portfolios, which used ETFs and mutual funds. After a full redesign to integrate the managed accounts into the rest of the E*TRADE site, the robo-advisor was relaunched as Core Portfolios in 2017, and the mutual funds were eliminated for new clients.
Core Portfolios is the introductory level for E*TRADE’s managed accounts, with a minimum deposit of $500, with funds invested in non-proprietary ETFs at an annual fee of 0.30% of assets under management. As your assets increase, you may choose to move into an account with a higher level of personal service. The next step up is E*TRADE Blend Portfolios, with a minimum of $25,000, giving you access to a financial advisor who works with you to create a more personalized portfolio containing mutual funds and ETFs. Dedicated Portfolios are available for a minimum of $150,000, with a dedicated financial consultant who actively manages a portfolio of stocks, ETFs, and mutual funds. The fees for these latter two services are higher, although the fees drop as the asset balance increases. This review focuses on the robo-advisory Core Portfolios.
Clients can select socially responsible or smart beta investments
Existing E*TRADE clients can quickly add a Core Portfolios account
The digital dashboard offers a clear view of the portfolio
Goal planning is not as central to the platform as it is in competitors
Goal setting tools are outside the Core Portfolios experience
Tax-loss harvesting is not enabled
The language used during the setup process is very simple, and every question asked during the initial questionnaire is accompanied by a help button so the new customer understands why that information is needed. Risk-related questions are asked in two different ways – graphically and with a verbal description – to make sure the client understands the level of risk being chosen. The screen shown below lets you click through the five possible risk levels and assess your comfort level with potential gains versus losses.
Once you’ve completed the Q&A, a portfolio recommendation is displayed. You can still adjust the overall risk level at this point. Then you’re asked if you want to include socially responsible ETFs or smart beta ETFs. The latter are more actively managed and are intended to beat the market if possible.
Next, you open an account, and then you can see the details of the recommended portfolio. Possible taxable account types include individual accounts, joint accounts, custodial accounts and individual retirement accounts (IRAs).
E*TRADE’s robo-advisory service is not as driven by goal planning as other robo-advisories. You create a single pot of money to fund all of your goals. According to E*TRADE officers, their clients felt that having a variety of separate goals just muddied the waters and made the experience more confusing. However, clients have access to all of E*TRADE’s research and education offerings, which include retirement calculators and other planning tools, but these functions are not built into the Core Portfolios experience.
E*TRADE is primarily meant to be an investment platform, but it does offer some additional services. Investors are, of course, encouraged to set up automatic deposits to keep money flowing into the account. Margin is not enabled for managed portfolios, but you can open a line of credit for 50% of your holdings through E*TRADE Bank if your total assets are over $50,000. Interest rates are on the high side, currently at 7.334% annually for loans between $50,000 and $100,000.
E*TRADE recently made it possible for withdrawals to be initiated online; until early 2019, you had to call to request a withdrawal. If you start a withdrawal, you’re informed what the capital gains effects will be. This is done for tax-planning purposes.
The initial portfolio is compiled by E*TRADE’s investment strategy team. The basic contents are:
- ETFs from iShares, Vanguard, and JP Morgan
- Socially responsible portfolios including ETFs from iShares
- Smart beta portfolios designed to outperform index fund investing
The weightings of the sample portfolios are right in line with Modern Portfolio Theory (MPT), which should offer investors the appropriate amount of diversification and risks and returns tailored to their stated tolerance.
Although it is not entirely clear, it looks like the algorithms take over after the investment strategy team clears the contents of the initial portfolios. This means that rebalancing and shifts to a more conservative portfolio as you reach your investment horizon will be done by the algorithms. Accounts are rebalanced semi-annually, or whenever the cash on hand exceeds 6%. The target allocation for cash was 4%, quite a bit higher than most other managed accounts that charge their clients management fees, but was recently reduced to 1%. When you make a withdrawal, the algorithm takes out available cash first, and then sells off other investments to maintain the prescribed asset allocation. As mentioned, you will be shown a screen that indicates your potential tax bill after the sale.
E*TRADE Core Portfolios do not have tax-loss harvesting enabled. This is a key feature that is missing from the platform, and one that competitors have made central to their offerings. In the same vein, the reporting on your progress toward the single goal you have defined is well designed, but you’re not given suggestions for shoring up the account if you’re falling behind. Here again, other platforms better integrate goal tracking and funding prompts, which may help younger investors, in particular, to stay on track. If you have other E*TRADE trading accounts, you can see how your overall holdings at the firm are performing, but you can’t import assets from other financial accounts for a complete picture.
The workflow on the mobile app is easier than on the website. E*TRADE recently enabled withdrawals on the mobile app; you can quickly move money into and out of your E*TRADE bank account with a tap or two. You can also open an account on a mobile device.
Overall, the desktop design is clean, but there are a couple of spots where a new client – especially one who is unfamiliar with investing concepts – could use more help, especially during the account opening process. There is more detailed information about the Core Portfolios on the full website, including the fee schedule contained in the E*TRADE Wrap-Fee Programs Brochure.
There is online chat available 24/7 on the website and on mobile. Although the telephone representatives we spoke to were knowledgeable and helpful, it took an average of almost seven minutes on hold before a human was available. You can talk to a financial advisor on the phone or walk in to a brick-and-mortar location for help. Telephone service hours are weekdays from 8:30 a.m. to 8:30 p.m. Eastern time.
The online FAQs are somewhat incomplete and would be easier to read if the questions were organized by topic.
Education & Security
Clients receive a customized market commentary newsletter every month, based on the contents of the portfolio. The entire E*TRADE knowledge base, which includes a wide variety of educational content, is available to Core Portfolios clients. The education center is well worth a visit and is packed with terrific video and written content. You can design your own class based on your knowledge level and personal interests.
The website and mobile apps carry a high level of encryption. Mobile apps can be unlocked using facial recognition or a fingerprint. Securities in accounts are insured by SIPC for up to $500,000, with excess Securities Investor Protection Corporation (SIPC) insurance by London Insurance with an aggregate limit of $600,000,000.
Commissions & Fees
E*TRADE Core Portfolios service charges 0.30% annually for assets under management, assessed quarterly. The underlying ETFs have additional management fees that average 0.07% to 0.08%. Fees for the socially responsible and smart beta ETFs are 0.25%. It’s a reasonable amount to pay given clients can consult a financial advisor.
- Monthly cost to manage a $5,000 portfolio: $1.25
- Monthly cost to manage a $25,000 portfolio: $6.25
- Monthly cost to manage a $100,000 portfolio: $25.00
Is E*TRADE Core Portfolios a Good Fit for You?
Similar to other robo-advisory services launched by established online brokers, E*TRADE Core Portfolios is an ideal choice if you already have a relationship with the parent firm and want to manage some of your investments passively. E*TRADE is very competitive in its core business as an online broker, but elements of its Core Portfolios offering seem to be thought of as an extension of that business rather than as an offering in and of itself. The methodology is solid and the features are sufficient, but the experience isn’t as complete as other platforms that have made goal-setting and progress reports a key part of their offering.
Compared to using E*TRADE for a self-managed portfolio, the Core Portfolios offering is geared at casual investors looking to have a passively managed, headache free portfolio. Compared to other robo-advisories, however, the Core Portfolios approach assumes you are already comfortable with investing and know exactly where you need to be for your particular investment goal. Intermediate and experienced investors will welcome the lack of hand-holding, but new investors may find it a bit jarring. That said, if you are just looking to automate your portfolio and you already hold accounts with E*TRADE, then Core Portfolios is a natural choice.
Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of robo-advisors. Our 2019 reviews are the result of six months of evaluating all aspects of 32 robo-advisor platforms, including the user experience, goal setting capabilities, portfolio contents, costs and fees, security, mobile experience, and customer service. We collected over 300 data points that weighed into our scoring system.
Every robo-advisor we reviewed was asked to fill out a 50-point survey about their platform that we used in our evaluation. Many of the robo-advisors also provided us with in-person demonstrations of their platforms.
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