E-Trade Adaptive Portfolio Review

E-Trade is a respected online broker, and in June of 2016, they launched their robo-advisor product to serve their customers better. In this E-Trade Adaptive Portfolio review, we’ll discuss how the new arm of the company distinguishes itself from other competitors in the marketplace.

They began by adding some unique fund types to their line-up, allowing investors to branch out from the traditional index-tracked exchange-traded funds (ETF’s) into managed mutual funds.E-Trade’s Adaptive Portfolio also gives clients an opportunity to interact directly with a team of certified financial consultants to get personalized advice and recommendations on how to best meet your portfolio goals.

To use their service, you’ll need a $10,000 account minimum, and will pay an annual 0.30% management fee, and expense ratio’s ranging from 0.20% to 0.45%, depending on fund type.

Below we explore the details of how the E-Adaptive Portfolio works, including the basics you need to know, pros, and cons, and who is the best fit for this investment opportunity.

At A Glance Summary of E-Trade Adaptive Portfolio

E-Trade Adaptive Portfolio investors need to know the basics about the service.Here are the important highlights.

Account Basics

  • Investors must have a minimum of $10,000 actively managed to use the service.
  • There are a few different fees you’ll incur annually.
  • 0.30% account management fee
  • EFT portfolio average investment expense ratios are 0.20%
  • Hybrid portfolios that include mutual funds range from 0.20% to 0.45%
  • $60 fee to transfer out or close the account
  • Users can build their portfolio one of two ways:
  • An actively managed ETF portfolio
  • A hybrid ETF and mutual fund portfolio
  • Supported accounts include:
  • Individual and joint non-retirement accounts
  • Traditional, rollover, and Roth IRA’s
  • Custodial accounts
  • Automatic rebalancing is free for all account holders
  • There is no tax strategy included in the fees or available through the service

Investment Information

Your profile and allocations are built based on a questionnaire that will assign you into one of six risk profiles.Each of those risk profiles includes two options; an all ETF portfolio or a hybrid model that combines ETFs with mutual funds.

The allocations may be diverse and could include fixed-income funds, large and small-cap blend funds, emerging market funds, and international funds.Every portfolio managed by E-Trade Adaptive will maintain a 1% cash allocation, an attractive feature for investors who don’t want large percentages of their investment resources tied up in cash.

How it Works

Like most of their competitors, E-Trade Adaptive Portfolio begins by asking users a series of nine questions to determine your risk tolerance.Their aim is to ask the common questions in subtly different ways to best assess what type of asset disbursement will be best for you.

After compiling your answers, E-Trade assigns users to one of five risk profiles that range from conservative to aggressive.In each risk profile, investors are given the choice of using just ETF investments or branching into their hybrid model that includes managed mutual funds.

Once the selection is made, and the account is fully funded, users will be able to see line by line which funds are used and the fees that they pay on each.

E-Trade Adaptive Portfolio Standouts

With all the different robo-advisors in the marketplace, it’s sometimes simpler to examine where they stand out.Here are some of the features that E-Trade offers that are different than their competitors.

Education and Support

While you won’t be assigned a one-on-one advisor, E-Trade takes customer support very seriously.They provide access to licensed professionals during regular business hours via chat, phone, or email.They also have a plethora of online tools that allow you to find reliable information on the different risk levels, the portfolios and funds associated with each, details about the fund relevance, and how the investment matches your goals.Clients can also view reports on the past and projected performances of the portfolio they’ve matched with to provide a better idea of what to expect from their investments.

Daily Automatic Rebalancing

Although most robo-advisors offer some type of automatic rebalancing, E-Trade’s Adaptive Portfolios do it daily.They use an algorithm that compares accounts against their target allocations and submits necessary trade orders to keep the accounts from drifting out of line.

Fully Integrated with E-Trade Brokerage Accounts

To utilize the Adaptive Portfolio service, users need to invest a minimum of $10,000 specifically with the robo-advisor, not just with E-Trade in general.However, it’s simple for existing E-Trade clients to convert brokerage accounts into a managed account by enrolling in the program.As a user, you won’t need to sell any securities or make any changes before you transfer.The Adaptive Portfolio platform will take care of that for you by liquidating any holdings that aren’t in your recommended allocations without charging you any commissions.However, it’s important to note; you may incur capital gains or losses as part of the process.

Potential Drawbacks

There are many attractive features when considering E-Trade Adaptive portfolio, but there are a few potential drawbacks that deserve acknowledgment.

High Account Minimum

Although a $10,000 minimum isn’t unheard ofin the modern robo-advisor landscape, itis higher than some of the firm’s main competitors.The company attributes the higher threshold to their need to create a truly diversified portfolio, which is likely the case if you select to use managed mutual funds as part of your mix.

No Tax Strategy Available

E-Trade doesn’t provide any tax strategy counseling at all, and that could be problematic for investors who want resources to help reduce capital gains taxes.You may need to employ outside assistance with tax-loss harvesting, which can be costly.Many competing services offer this feature for free or once you reach a minimum investment threshold.

Who Would Benefit

If you are a current E-Trade customer, this robo-advisor could be the perfect fit for you.The company makes it easy to start using the service and handles all the back-office components for you seamlessly.Investors who are interested in the mutual fund space are also a great prospect for this product as there aren’t many other automated online investing platforms that include them in the mix.Finally, if you’re someone who wants to manage your investments to your goals closely, the daily automatic rebalancing service that E-Trade provides is both valuable and helpful.

Final Thoughts

If you’re searching for a robo-advisor that adds actively managed mutual funds to the mix to try to perform better than the market, the Adaptive Portfolio is a strong option.Even more so, this product is a great fit for current E-Trade clients who are readyto check out a robo-advisor.  It’s a seamless process to transfer the funds, and the annual fees are right onpar with what you find most anywhere else.

Investors who don’t meet these criteria might want todo more research before making a final decision.  It’s possible that you could get more services for the same, or less, with another option.While this E-Trade Adaptive Portfolio review is overall positive, people who need help with tax strategy or want to start with a smaller investment may be better suited with another provider.

About the Author HarryC

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