Wealthfront and E*TRADE Core Portfolios are coming at the robo-advisor space from different directions. Wealthfront was created to be a robo-advisor and it has evolved with the industry. E*TRADE Core Portfolios, on the other hand, is one of many options that clients of the online discount brokerage have to choose from. Of course, both platforms are designed to populate an automatically managed portfolio with low-cost exchange-traded funds (ETFs) according to Modern Portfolio Theory (MPT) principles. Beyond that overarching similarity, however, there are many key differences between Wealthfront and E*TRADE Core Portfolios that will help you in choosing the best one for your financial needs.
- Account Minimum: $500
- Fees: 0.25% for most accounts, no trading commission or fees for withdrawals, minimums, or transfers. 0.42%–0.46% for 529 plans. Underlying portfolios of ETFs average 0.07%–0.16% management fee
- Ideal for people looking for a simple, easy-to-use robo-advisor to manage their money
- Built for people who want to track their progress towards stated financial goals
- Great for people wanting a single service to connect financial accounts and show the bigger picture
- Investors with over $100,000 with Wealthfront gain access to additional investing possibilities
- Account Minimum: $500
- Fee: 0.30%
- Aimed at investors who want an easy way to get their cash working in the markets and don’t require a lot of handholding in identifying financial goals
- Easy for those who were customers of the standard E*TRADE platform to create a Core Portfolios account
- Has socially responsible portfolio options for investors concerned about the triple bottom line
There are major differences between Wealthfont and E*TRADE Core Portfolios when it comes to creating financial goals.
Wealthfront’s goal planning is the best of all the services we reviewed this year, with very specific ways to forecast your financial needs. If one of your goals is to buy a house, Wealthfront uses third-party sources such as Redfin and Zillow to estimate what that will cost. College planning gets extremely granular, with forecasts of tuition and costs at thousands of U.S. universities from the Department of Education. Your dashboard shows all of your assets and liabilities, giving you a quick visual check-in on the likelihood of attaining your goals. You can even figure out how long you can take a sabbatical from work and travel, while still making your other goals work.
E*TRADE Core Portfolios is not driven by goal planning. You create a single pot of money to fund all of your goals. According to E*TRADE, clients felt that having a variety of separate goals just muddied the waters and made the experience more confusing. You still get access to all of E*TRADE’s research and education offerings, though, which include some planning tools. That said, these functions are not built into the Core Portfolios experience. The reporting on your progress towards 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. If you have other E*TRADE 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.
Wealthfront’s retirement planning takes Social Security projections into account. Once all of your financial accounts are entered, such as IRAs and 401(k)s and any other investments you might have, Wealthfront shows you a picture of your current situation and your progress towards retirement. All of this can be done without talking to a human. Their Path planning tool helps you compare your projected retirement income against your current spending habits so you’ll be able to see whether you can maintain your lifestyle later.
As mentioned, E*TRADE clients can use all of the broker's research and education offerings, which include retirement calculators. That is, however, the extent of the retirement-specific planning support you will get from E*TRADE Core Portfolios.
Wealthfront and E*TRADE Core Portfolios both offer a wide variety of account types. Choosing a winner in this category depends on what you need. For example, Wealthfront is one of the few robo-advisors that offer 529 college savings plan accounts, while E*TRADE Core Portfolios offers Uniform Gift to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA) accounts that Wealthfront does not.
Wealthfront account types:
- Individual taxable accounts
- Joint taxable accounts
- Trust taxable accounts
- Traditional IRA accounts
- Roth IRA accounts
- SEP IRA accounts (for the self-employed and small businesses)
- IRA transfers
- 401(k) rollovers
- 529 college savings plan accounts
- High-interest cash accounts
E*TRADE account types:
- Individual taxable accounts
- Joint taxable accounts
- Traditional IRA accounts
- Roth IRA accounts
- SEP IRA
- Rollover IRA
Features and Accessibility
As with any comparison of robo-advisors, the features you will actually use are more important than the range of features offered. Both Wealthfront and E*TRADE Core Portfolios have borrowing options that may appeal to investors who like the idea of being able to access their capital without liquidating the portfolio. A key difference in features and accessibility is the fact that E*TRADE Core Portfolios comes with access to human financial consultants whereas Wealthfront is holding true to its digital-only approach.
- 529 college savings: These accounts are rare among the robo-advisories. Fees are slightly higher because these plans include an administrative fee.
- Wealthfront cash account: Wealthfront offers a high-interest cash account paying 2.32% APY with no fees, unlimited transfers and FDIC insurance up to $1 million.
- Portfolio line of credit: Accounts with more than $25,000 have access to a line of credit at 4.75% to 6% interest. There’s no credit check or credit score impact, and you can borrow up to 30% of your account.
- PassivePlus investing: Wealthfront’s rules-based investment strategies aim to maximize client investments using tax-loss harvesting. At higher asset levels ($100,000+), the company offers stock-level tax-loss harvesting and risk parity. At $500,000 and up, the strategy includes Smart Beta, which weights the stocks in your portfolio more intelligently.
E*TRADE Core Portfolios:
- SRI and Smart Beta: Clients can select socially responsible or smart beta investments.
- Secured loans: You can borrow against the balance in your account with available funds of over $50,000, although interest rates are high.
- Easy-to-read dashboard: The digital dashboard on E*TRADE’s website or mobile app offers a clear view of portfolio performance and allocation.
- Personal help: Financial consultants are available by phone or at one of E*TRADE’s branch offices.
Although E*TRADE Core Portfolios is very competitive, Wealthfront is hard to beat when it comes to fees.
Wealthfront has a single plan, which assesses an annual advisory fee of 0.25% with a minimum of $500. There are no additional trading fees. Larger accounts at Wealthfront qualify for additional services. Accounts over $100,000 are eligible for a stock-level tax-loss harvesting service, and those over $500,000 can opt into the Smart Beta program, which re-weights the holdings in your portfolio using Wealthfront’s proprietary system.
E*TRADE Core Portfolios charges 5 additional basis points, or 0.30% of assets under management, assessed quarterly based on the average daily balance and deducted from available cash. Portfolios are designed to hold approximately 1% cash, mainly to cover these fees. There are no additional trading fees.
For both firms, there are management fees associated with the underlying ETFs, that add an additional 0.10%-0.25% to your costs. These are invisible to you, though, as they are assessed by the ETF providers.
Wealthfront and E*TRADE Core Portfolios have identical minimum deposits at a very reasonable $500.
- Wealthfront: $500
- E*TRADE Core Portfolios: $500
At Wealthfront, to determine the portfolio you’ll invest in, you’re asked a few questions about your attitude towards risk and when you might need the money. You’re shown the exact portfolio prior to funding your account, but you cannot customize the pre-set portfolio at all. Wealthfront primarily uses low-cost exchange-traded funds (ETFs) to cover 11 asset classes, not including cash. The ETFs covering these asset classes are provided by the usual suspects like Vanguard, Schwab, iShares, and State Street. If you have more than $100,000 in your Wealthfront investing account, you can choose a stock portfolio rather than portfolios of ETFs. You can also put some companies on a restricted list if you’d rather not invest in them.
E*TRADE Core Portfolios uses ETFs from iShares, Vanguard, and JP Morgan. Socially responsible portfolios include ETFs from iShares. Smart beta portfolios are designed to outperform index fund investing, and carry higher management fees. E*TRADE Core Portfolio accounts are rebalanced semi-annually, or whenever the portfolio shifts too far from its target asset allocation. The portfolio management display focuses on asset allocation and performance metrics. The target allocation for cash is 4%, which is quite a bit higher than most other managed accounts. When you make a withdrawal, the algorithm takes out available cash first and then sells off other investments to maintain the prescribed asset allocation. You’ll be shown a screen that indicates your potential tax bill after the sale, which is an unusual touch.
Wealthfront has a significant edge over E*TRADE Core Portfolios if you are considering a taxable account. Wealthfront has one of the most robust tax-loss harvesting programs of all the robo-advisors. The company has an excellent white paper explaining the process, but rest assured that the methodology is sound and will benefit your portfolio over time. E*TRADE Core Portfolios does not currently offer any tax-loss harvesting, although it does show your potential tax bill after you put in a sell order.
Both Wealthfront and E*TRADE Core Portfolios have tight security on their web platforms, and offer two-factor authentication as well as biometric logins on their mobile apps.
Wealthfront is a member of the Securities Investor Protection Corporation (SIPC) and client accounts are protected up to a maximum of $500,000. The site actually has an article on why SIPC insurance doesn’t protect investors in the way they think it does, but the company still holds the coverage. Wealthfront trades are cleared at RBC Correspondent Services, a Canadian company which focuses on wealth management and financial advisors rather than clearing firms that serve broker/dealers with very active traders.
As E*TRADE is an online brokerage, the client funds are handled in-house. E*TRADE Core Portfolios accounts are also insured by SIPC for up to $500,000, with excess SIPC insurance by London Insurance with an aggregate limit of $600,000,000.
E*TRADE Core Portfolios enjoys a higher customer service rating than Wealthfront.
Wealthfront does not have an online chat feature on its website or in its mobile apps. There is a customer support phone line if you need help with a forgotten password. Most support questions posed on their Twitter account are answered relatively quickly, though we saw one that took more than a week before there was a response.
E*TRADE Core Portfolios offers online chat available 24/7 through E*TRADE’s 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 into 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.
Overall, Wealthfront and E*TRADE Core Portfolios both do an admirable job in building you a diversified, low-cost portfolio. Both services have also made this accessible to younger investors through a low minimum deposit and reasonable fees. However, Wealthfront and E*TRADE Core Portfolios also share the fact that they are asking you to give something up. With Wealthfront, the sacrifice is human support in exchange for a very competitive service that improves as your assets under management grow. With E*TRADE Core Portfolios, you are being asked to set your own goals without much hand-holding through the system. In theory, an investor looking for a robo-advisor should be comfortable making either trade-off. That said, in comparison to Wealthfront, E*TRADE Core Portfolios is also asking you to give up tax-loss harvesting on taxable accounts while charging an additional 5 basis points in fees. For this reason, Wealthfront is the better choice in the long run for most investors, and particularly so for younger investors who will benefit from the goal-centered approach and likely not mind the lack of a human advisor.
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