To help investors better adapt to various market conditions and craft a diversified investment portfolio, TD Ameritrade will provide a low-cost robo-advisory service that offers intuitive and easy-to-use investment advice.
“Today’s investors want more choices for investment advice. Some want that guidance to come from a human, partnered with digital platform, while others might prefer an all-human or all-digital approach. Our job is to deliver solutions that are easy-to-use, effective and allow our clients to grow with us as their needs evolve,” Tom Bradley, president of retail distribution at TD Ameritrade, said in a note.
By incorporating the many technological enhancements, people are able to gain access to streamlined financial advice for self-directed investors.
The new TD Ameritrade Essential Portfolios is an automated, low-cost advisory service for digital-first investors. There will be five portfolios, all designed by Morningstar, to provide investors with a diversified strategy based on low-cost exchange traded funds from Vanguard or BlackRock’s iShares. The minimum investment is $5,000 to open an Essential Portfolios account with a 0.30% fee per year.
The low minimum investments in the robo-advisor program may be a good way for starting investors to begin saving today as many human advisors require large minimum balances. The robo-advisory is seen as an easy step for investors to gain more in-depth financial advise without having to hire a financial advisor, allowing users to access their accounts from anywhere with a smartphone or personal device.
Some advice and guidance is better than nothing. Research has shown that people who have a financial plan with specific goals are 85% confident they will reach their retirement goals, compared to 28% that do not, according to TD Ameritrade.
Investors will choose a robo portfolio based on their investment goals and their general investment time frame, selecting from options like retirement, wealth-generation, education or other. A range of risk exposure is also provided from least to most risky options.
Using a slider bar to change monthly contributions or target dates, investors are able to further customize their recommended strategies. Through the various adjustments, users may find varying details on asset allocations, expected returns and some limited historical returns.
TD Ameritrade joins a number of custodians in adding their own robo-advisories. Charles Schwab launched its retail robo-advice, Intelligent Portfolios, in March 2015. Fidelity Investments came out with its Fidelity Go in July 2016. Others money managers in the space include Vanguard Group, BlackRock Inc., Morgan Stanley and Bank of America.