Founded in 1918 as a stock life insurance company, the Teachers Insurance and Annuity Association (TIAA) is a wholly-owned subsidiary of the TIAA Board of Governors, a New York non-profit organization. The association and affiliates provide a wide range of retirement, annuity, and wealth management services marketed primarily to the educational community. In addition to traditional financial offerings, the TIAA Personal Portfolio provides algorithmic investment advice for funds managed through TIAA-CREF Brokerage Services and cleared by Pershing LLC.
TIAA Personal Portfolios charges a competitive 0.30% wrap fee on assets under management, paid quarterly. However, the low fee is misleading because proprietary mutual funds can comprise up to 90% of an “actively managed” portfolio. TIAA owns Nuveen Securities and the TIAA-CREF Family of Funds, allowing the firm to double-dip by collecting high mutual fund fees along with program management fees. This conflict of interest reduces returns in taxable accounts, but TIAA mitigates the impact with IRAs by providing fee credits and reimbursements.
Excellent goal-planning tools
Competitive management fee
Top-tier financial institution
High-expense proprietary funds
No access to financial advisors
No tax-loss harvesting
No dedicated mobile app
The TIAA Personal Portfolio description, FAQ, and setup interface can be tough to find because you first need to pick one of nine major account types laid out in a marketing presentation. In fact, many people won’t know it’s an automated investment advisory service until they get to the fine print because descriptive materials refer to “advanced technology” rather than computer-driven investment.
New users anonymously complete a brief questionnaire that asks about your life goals, time horizons, and monthly contributions. A conservative portfolio then appears with instructions to choose a comfortable risk level, which may generate a different portfolio. There is a handy link to a separate questionnaire about risk tolerance if you can’t decide on risk levels.
The last question requires you to choose between index mutual funds/ETFs and actively managed mutual funds that are able to focus on socially conscious investments. Once selected, the system recommends a portfolio featuring a pie chart, a list of funds, and the expected long-term performance. You can pick a different portfolio or ask for a specific fund to be removed by calling customer service and requesting a “personalization.”
The 12-page advisory agreement can be read in advance, providing basic disclosure that is sometimes missing at other robo-advisors. A minimum of $5,000 is required to fund and maintain the account, which can be set up as a traditional IRA, Roth IRA, Individual taxable account, or joint taxable account.
The TIAA website features an impressive variety of goal-setting tools and calculators to help clients figure out how much money needs to be set aside in order to reach their stated goals within realistic time frames. Many tools focus on retirement planning, but college planning and life assessment calculators are equally valuable in long-term financial planning.
You can check your progress by logging into TIAA.org, selecting “Brokerage,” and choosing the TIAA Personal Portfolio. The account summary includes a hypothetical projection through the stated period, which is duplicated on a “Goals” page. The “Make a Change” link allows you to change their investment profiles with a few clicks. However, there’s no way to consolidate external accounts for goal-planning purposes.
TIAA Personal Portfolio makes it easy to set up deposits, but hard to get your money out. Deposits require logging into the account interface and making a request to a linked bank account. TIAA also supports recurring deposits that can be made weekly, biweekly, on the 1st and 15th of the month, monthly, quarterly, semi-annually or annually. One-time or recurring withdrawals from taxable accounts can also be set up, but withdrawals from retirement accounts are overly complicated, requiring you to make a phone call to customer service.
You are directed to “qualified representatives” to answer investment questions and cannot speak with financial advisors. TIAA pays interest on overnight cash sweeps but offers no other banking services through this program. An affiliate gets compensation through the bank sweep program, which may account for the low 0.40% interest rate (as of May 2019). Of course, TIAA offers a wide range of financial products outside the TIAA Personal Portfolio platform but they are not integrated into the offering.
TIAA Personal Portfolio takes a traditional approach to creating and populating your portfolio, but does so with a socially conscious flavor. You are offered one of three broad model portfolio categories, customized further by age, holding period, and other criteria:
Basic: Investment managers choose funds that “attempt to track the market.” These index-tracking funds tend to have “lower expenses on average, compared to active mutual funds.”
Insight: An active style in which investment managers “research and select funds that attempt to outperform the market over the long term.” TIAA admits that fund expenses for Insight portfolios will be higher than average compared to index-tracking funds.
Impact: An active style in which investment managers prioritize socially responsible investing criteria while seeking to “track the market.”
TIAA populates these portfolios from a culled “Reference Investment List” that changes over time, as well as a broad-based index fund list. These lists include proprietary Nuveen Funds and the TIAA-CREF Family of Funds as well as non-affiliated funds. The expensive proprietary funds can comprise up to 90% of the Impact portfolio, 54% of the Insight portfolio, and 0% of the index-driven Basic portfolio.
TIAA Personal Portfolio doesn’t provide a lot of detailed information on how exactly your portfolio is managed after being funded. The SEC-mandated ADV-2 brochure states that TIAA provides the following management services for the Personal Portfolio program:
- Professional investment management
- Regular review of the mutual funds and exchange-traded funds
- Daily account monitoring
- Detailed performance reporting and goal tracking
- Access to licensed consultants
TIAA engages in micro-rebalancing on a daily basis but offers few details on its behind-the-scenes investment methodologies. A further review found no references to tax-loss harvesting, but the brochures state that a cost accounting process is applied to pick securities for sale.
The TIAA website is mobile-ready. TIAA provides the same iOS and Android mobile apps for all types of accounts, which may cause confusion because clients need to drill through menus to access the Personal Portfolio program. In addition, the program’s FAQ specifically states that clients need to log into the website to view progress or make changes to investment goals. That material might be outdated, suggesting that TIAA should rewrite the text to clarify how Personal Portfolio clients can use mobile apps.
Getting around the website can be challenging because the Personal Portfolio program comprises just one of nine TIAA offerings. A dedicated FAQ makes the job easier, but a dedicated site would provide a useful and permanent solution. Fortunately, the system saves user details if the setup process is exited prematurely. Disclosures and fee information are well-written, providing a detailed conflict of interest statement.
TIAA Personal Portfolio has an old-fashioned reliance on the telephone. Account holders use a different phone number than the broad TIAA clientele, with customer service hours listed as 8:00 a.m. to 7:00 p.m., Monday through Friday. Contact attempts produced a variety of waiting times, from less than 30 seconds to almost three minutes. There’s no live chat for prospective or current clients, and a built-in message app on the Contact page requires two business days for a response.
Education & Security
The TIAA site provides excellent goal-planning resources that include checklists, how-to articles and all sorts of calculators. You can apply these valuable tools to estimate your total costs of retirement, perform top-down reviews of assets, and plan major life goals. Better yet, these resources are available to you anonymously, allowing prospective clients to take a closer look before committing.
TIAA Personal Portfolio has solid security and coverage for client accounts. The site uses 256-bit SSL encryption and keeps no personal data. BNY Mellon subsidiary Pershing LLC holds all client funds, providing access to Securities Investor Protection Corporation (SIPC) insurance and excess insurance, as well as FDIC insurance for overnight bank sweeps.
Commissions & Fees
TIAA Personal Portfolio has competitive pricing at first glance, but the hidden fees could potentially undermine some investor returns. The robo-advisor charges a competitive 0.30% wrap fee, paid quarterly. That sounds reasonable, but proprietary mutual funds can comprise up to 90% of your portfolio’s allocation and you are responsible for all the fund costs. The actively managed funds, in particular, carry a higher average expense ratio. Fortunately, IRA account holders get to avoid this double-dipping, receiving fee credits and reimbursements. Pershing LCC may also charge you paperwork fees to transfer accounts to other brokers or to send wire transfers.
Is TIAA a Good Fit For You?
TIAA Personal Portfolio is a solid option for investors looking to engage in socially conscious investing through a financial institution with a long and stable history. Moreover, the wider TIAA product universe can act as a one-stop-shop for financial services. If you’re already enrolled in other TIAA programs, then TIAA Personal Portfolio is an easy choice for automating the management of some or all of your portfolio. You may also benefit through lower costs and promotions for Personal Portfolio or related services.
That said, the potential for higher than average fees when all the costs are factored in does lower the attraction of TIAA Personal Portfolio. Investors just starting out may also struggle with the $5,000 required to open an account. It appears that TIAA Personal Portfolio is designed for the educators and others already in the TIAA universe - it isn’t focused on being the cheapest possible robo-advisor. That fact will probably not bother TIAA’s target customers who are already committed to the company. For newcomers, however, there are lower-cost, lower-account-minimum robo-advisors that you may want to compare and contrast with TIAA’s offering before signing up.
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