Wealthfront and TD Ameritrade Essential Portfolios are solid offerings in the robo-advisory space. Wealthfront started out as a digital advisory aimed at younger investors and has been blazing that trail ever since. TD Ameritrade was part of a different market disruption with its roots in the online discount brokerage space, so the robo-advisory represents a reach into a new and growing area of digital finance. We’ll look at the key elements of each of these services to help you decide which one is the best choice for managing your money.
On November 25, 2019, Charles Schwab announced a buyout of TD Ameritrade’s online brokerage. The transaction itself is expected to close in the second half of 2020, and in the meantime, the two firms will operate autonomously. Schwab expects the merger of its platforms and services to take place within three years of the close of the deal.
- 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
- Great for those looking to connect all their financial accounts to see the bigger picture
- Designed for people who would like to set and track their goals
- Access to a portfolio line of credit for those interested in a loan
- If you are someone who has an account of $100,000 or more you get access to additional securities
- Account Minimum: $5,000
- Fee: 0.30% of assets managed per year
- Focused on newer investors who are interested in long-term investing
- Great for those looking for extensive research capabilities
- Appropriate for those new to investing or those who would prefer a lower-fee robo option
- Designed to make novice investors more comfortable with a wider variety of asset classes
Wealthfront’s goal planning is the best of all the services we reviewed this year, and it has the edge over TD Ameritrade Essential Portfolios in this area.
Wealthfront offers 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.
TD Ameritrade’s offering has little goal planning help, though there are articles and monthly emails customers receive to give them planning ideas. To set your investing goals, TD Ameritrade wants you to visit a branch and talk with a representative at no additional charge. You can also use the firm’s email channels or make a phone call. You can set an overall portfolio goal dollar amount, but that figure is not tied to a specific financial goal such as retirement, buying a house, or making a large purchase. Instead, it all falls into a general investing bucket. Both the website and the mobile app show you your asset allocation and changes in account value over time in easy-to-understand graphical formats. You can see how you’re tracking against the general goal you’ve set, and make adjustments to monthly deposits or change the goal if you’re falling behind.
Naturally, Wealthfront also has the edge on TD Ameritrade Essential Portfolios when it comes to retirement planning.
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.
TD Ameritrade's primary planning tool available online is a retirement calculator. There are other resources in the broader TD Ameritrade site that are relevant, but the main idea seems to be that you talk to a human representative about your retirement at no additional charge.
TD Ameritrade Essential Portfolios has the widest variety of account types, so it has the clear advantage here. That said, Wealthfront is not far behind when it comes to the accounts clients will use the most. The two robo-advisors are among a small group that offer 529 college savings plan accounts.
Wealthfront account types:
- Taxable accounts (individual, joint, and trust)
- 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
TD Ameritrade account types:
- Individual taxable accounts
- Joint taxable accounts
- Traditional IRA accounts
- Roth IRA accounts
- Minor IRA accounts
- Individual 401(k) accounts
- Trust accounts
- Corporate accounts
- Coverdell accounts
- Non-profit organizations
- Other account types also available
Features and Accessibility
Wealthfront and TD Ameritrade Essential Portfolios are very evenly matched in terms of features and accessibility. Choosing a winner here is difficult as it very much depends on which features you will actually use.
- 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 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. 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.
TD Ameritrade Essential Portfolios:
- Get social: You can select a Socially Aware portfolio.
- Get mobile: The mobile app offers a clear look at progress towards investing goals.
- Account types: There is a wide variety of account types available, including 529 college savings plans, Coverdell ESAs, and trusts.
- Tax-loss harvesting: All taxable TD Ameritrade portfolios are eligible for tax-loss harvesting.
- Premium plan available: Clients can upgrade to TD Ameritrade's Selective Portfolios with a $25,000 balance.
Wealthfront has the edge over TD Ameritrade Essential Portfolios when it comes to fees, even if it is only by 0.05%.
Wealthfront has a single plan, which assesses an annual advisory fee of 0.25% with a minimum of $500. 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.
TD Ameritrade charges 0.30% of assets under management. The fee will be assessed at the beginning of each quarter in advance for that quarter and will be prorated for accounts opened and closed during that quarter. 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 requires investors to have $500 to get started compared to TD Ameritrade Essential Portfolios’ $5,000 minimum deposit. This makes Wealthfront more accessible for investors who are just getting started and may not have $5,000 in capital to commit.
- Wealthfront minimum deposit: $500
- TD Ameritrade minimum deposit: $5,000
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. Wealthfront follows Modern Portfolio Theory (MPT) in creating the asset allocations in your portfolio. 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. You’re shown the exact portfolio prior to funding your account, but you cannot customize the pre-set portfolio at all. If you have more than $100,000 in your Wealthfront investing account, you can choose a stock portfolio rather than a portfolio of ETFs. You can also put some companies on a restricted list if you’d rather not invest in them.
TD Ameritrade’s portfolios contain ETFs from Vanguard and iShares, plus a few other providers. You can choose socially responsible ETFs, but there is little in the way of portfolio customization. Portfolios are rebalanced at least annually, or whenever the allocations stray from the target. When you are setting up a portfolio on TD Ameritrade, you are given historical returns for the prior quarter, calendar year to date (updated quarterly), and previous year.
Minimizing your taxes in a taxable portfolio is time-consuming if you do it yourself. Robo-advisors can employ strategies like tax-loss harvesting much more efficiently, replacing assets at a loss with comparable assets to offset gains while scrupulously adhering to wash sales rules. Both Wealthfront and TD Ameritrade offer tax-loss harvesting for all taxable accounts.
Wealthfront and TD Ameritrade both provide sufficient security for investors. Both robo-advisors 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’s trades are cleared at RBC Correspondent Services, a Canadian company that focuses on wealth management and financial advisors, rather than clearing firms that serve broker/dealers with very active traders.
TD Ameritrade is also a member of the Securities Investor Protection Corporation (SIPC), providing coverage of up to $500,000 and additional supplemental coverage for each client up to $149.5 million for securities and $2 million for cash.
TD Ameritrade Essential Portfolios has the edge on Wealthfront in terms of customer service.
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.
TD Ameritrade makes online chat available, and our test calls to the phone support service were answered quickly and authoritatively. However, the FAQs don’t go into a lot of detail.
Wealthfront was our highest scoring robo-advisor overall in 2019, so it is natural that it has the edge over TD Ameritrade Essential Portfolios. Although Wealthfront dominates many categories, TD Ameritrade was still very competitive in terms of fees, and even beat Wealthfront in customer service and account types. Wealthfront’s biggest advantage, however, is its core approach with goal setting and an exceptional user experience throughout. This, coupled with a slight edge in fees, make Wealthfront the better choice for most investors. TD Ameritrade Essential Portfolios is a solid robo-advisor. As of right now, however, Wealthfront makes a strong case for being the best.
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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