For years, TradeKing has been recognized as one of the best discount brokerages out there. TradeKing is inexpensive, and offers a number of tools aimed at helping investors make the most of their money. However, these tools are largely best for those who have time to utilize them and do the legwork of building an investment portfolio.
Now, TradeKing recently introduced TradeKing Advisors, a service designed to provide more detailed guidance to investors who would like a little help with their portfolios.
We caught up with Rich Hagen, the President and CEO of the new TradeKing Advisors to find out the latest updates.
“We’ve been in the brokerage business for a while, offering self-directed brokerage services,” says Hagen. “Looking at our clients, we see that there are a lot of people that do really well. But there is also a big group that falls behind. We feel like we can help these people.”
TradeKing Advisors Features
|Options Trades||$4.95 + $0.65/contract|
|Accounts Available||Traditional IRA, Roth IRA, Rollover, IRA, SEP IRA, SIMPLE IRA, Custodial, Coverdell, Trust, Individual and Joint|
|Mobile App||Yes — Apple iOS and Google Android|
|Customer Service||Phone, Live Chat and Email|
|Promotions||Get $500 In Free Trades|
- Business Accounts — TradeKing Advisors also offers business accounts for sole proprietors, partnerships and corporations.
- Custom Asset Allocation — Your portfolio is constructed based on your risk tolerance as determined by an online questionnaire, but you can also choose between portfolio risk levels, giving you more control than typical robo-advisors do.
- Double insurance protection — Accounts are covered by SIPC, for up to $500,000 in cash and securities. Apex Clearing maintains an additional policy for up to $37.5 million per customer, including up to $900,000 in cash. Both protect against broker failure.
How Does TradeKing Advisors Work?
It’s important to understand upfront that you can’t make investment selections or trades in an account managed by TradeKing Advisors. But it’s a robo-advisor, so it’s likely that you won’t be looking to do any of that anyway.
When you open an account with TradeKing Advisors, one of the first things you’ll do is complete an online questionnaire that will establish your own personal risk tolerance level. They’ll recommend certain portfolios based on that risk tolerance.
This is a typical practice of robo-advisors, but TradeKing Advisors provides more flexibility in this regard, by allowing you to choose which portfolio you think will be the most appropriate for you.
TradeKing Advisors will then establish the portfolio allocation, keeping your risk tolerance in mind. And even though you can’t trade in the account, you do have the ability to adjust your risk level, which will then change the investment allocation.
Five portfolio levels are used:
- Moderate Growth
- Aggressive Growth
Investments will be made through a combination of exchange traded funds (ETFs) and exchange traded notes (ETNs). This is done to keep fund related expenses to an absolute minimum, particularly with the use of index based ETFs.
Your account will actually be held through TradeKing Securities LLC, and trades will settle through Apex Clearing, Inc.
In addition, two main portfolios are offered for all accounts, Core and Momentum.
Core Portfolios. This is the basic portfolio, and it will be invested in as many 17 different asset classes. There will be either an ETF or an ETN representing each asset class. The portfolio requires a minimum investment of $500, and will be invested in domestic and foreign fixed income securities, equities, and real estate. Dividends are automatically reinvested in this portfolio.
Momentum Portfolios. This represents an actively traded portfolio, which seeks to capture the momentum of the market at any given point in time. It is reviewed each month in response to ups-and-downs in the market, and for appropriate investment opportunities that will capitalize on that momentum. It can include as many as 20 asset classes, and will shift between those classes as market conditions change. Rebalancing of the portfolio takes place on on a monthly basis, which is also when dividends are reinvested consistent with that rebalance. The minimum initial investment this portfolio is $5,000.
Portfolio levels in each portfolio can range from conservative to aggressive, representing all five portfolio levels available on the platform.
TradeKing Advisors invests in a mix of 23 ETFs. Much like Wealthfront, they include funds that invest in both real estate and commodities. This is a departure from the typical robo advisor investment mix that is generally limited to a split between equity funds and bonds/fixed income funds.
Below are the specific ETFs that are currently used in each asset class.
- iShares MSCI EAFE Small-Cap (SCZ)
- PowerShares Global Listed Private Eq (PSP)
- Vanguard FTSE Developed Markets ETF (VEA)
- Vanguard FTSE Emerging Markets ETF (VWO)
- Vanguard Mid Cap ETF (VO)
- Vanguard Mid-Cap Growth ETF (VOT)
- Vanguard Mid-Cap Value ETF (VOE)
- Vanguard Small Cap ETF (VB)
- Vanguard Small Cap Growth ETF (VBK)
- Vanguard Small Cap Value ETF (VBR)
- Vanguard Total Market (VTI)
- Vanguard Value ETF (VTV)
- iShares JPMorgan USD Emerg Markets Bond (EMB)
- iShares TIPS Bond (TIP)
- Schwab U.S. TIPS ETF (SCHP)
- SPDR Barclays High Yield Bond (JNK)
- SPDR Barclays International Treasury Bond (BWX)
- Vanguard Short-Term Bond ETF (BSV)
- Vanguard Total Bond Market ETF (BND)
- iShares International Developed Property (WPS)
- Vanguard REIT Index ETF (VNQ)
- SPDR Dow Jones Global Real Estate (RWO)
- iPath Bloomberg Commodity Index TR ETN (DJP)
This two-pronged approach allows you to choose what you prefer. The core portfolio takes a passive approach, based on your risk profile. Asset allocation is the cornerstone of this portfolio, making use of low-cost ETFs to ensure that you have diversity as well as the appropriate asset allocation.
The momentum portfolio option is where managers can look for market opportunities to give your portfolio a little extra oompf. This portfolio is managed a little more actively, with the basics of your asset allocation as a foundation.
Hagen is quick to point out that TradeKing Advisors operates as a Registered Investment Advisor (RIA), so the focus is on making sure that the recommendations really are what are best for you. “We focus a lot on Millennials,” Hagen says. “These are folks looking for some direction, but they are also comfortable with some DIY and technology. We are also looking at Gen X, though. Gen X is tired of high fees from other RIAs, and we can help them save money.”
TradeKing Advisors Fees
The TradeKing Advisors approach to pricing is one of simplicity. For a portfolio up to $250,000 the management fees break down into two categories. For those who choose a core portfolio, the annual fee is 0.25% of your annual balance. You need at least $5,000 for this option. The momentum portfolio requires a minimum of $25,000 and charges a fee of 0.50% annually.
For portfolios larger than $250,000 you’ll receive a fee reduction of 0.25% for all managed assets. There are no transaction fees or other account fees associated with TradeKing Advisors; just the annual fee, which is a percentage of your account balance.
TradeKing Advisors also makes it easy to track your performance and review your holdings. The summary lets you see where you stand. Additionally, TradeKing Advisors has been working with Morningstar, and you can access reports. On top of that, Hagen wants to add commentary from portfolio managers to explain their decisions.
How to Open a TradeKing Advisors Account
If you already have a TradeKing Advisors account, it’s fairly easy to add an account. It’s all integrated, to make the transition seamless. You can open an account even without a TradeKing account.
You go through the process of answering the questions, and then you open an account with TradeKing Advisors, and transfer the money. It’s a fairly straightforward process, and pretty quick to get through, as far as opening a new account goes.
Hagen says that the service was designed with mobile in mind, to make it easier to use. “We wanted to do for online advisory what TradeKing did for investing, and we think we’ve done it,” says Hagen. It’s easy to manage your account on the computer, and on a mobile device, since it’s consistent, with responsive design.
Overall, TradeKing Advisors promises to be another solid entrant into the robo-advisory space. It’s not quite as affordable as Betterment (which you can use as long as you invest $100 per month automatically, even if you don’t have $10,000), but it’s very affordable when compared with more traditional investment advisory services.
“TradeKing Advisors bridges the gap between traditional advisory offerings that are too expensive and startups that might not be as trusted,” Hagen says. “TradeKing has been around long enough to be trusted, and we are also unbiased, affordable, and convenient.”
- Low Minimum Deposit — The $500 minimum for the Core Portfolio is on the low end, even among robo-advisors.
- Low Maintenance Fee — Just taking the example of the Core portfolio, with its annual fee of 0.25%, you can have $250,000 professionally managed for just $625 for the entire year. A traditional investment manager would charge you $5,000 to do the same job — if they'd take a portfolio that's that "small."
- No Trading Fees — Your annual fee is all you pay; the fee structure couldn't be simpler. Of course, this does not include ETF management and operating expenses which are charged within the individual ETFs.
- Hands-Off Investing — This is an outstanding platform for the investor who has no interest in managing their own investments.
- More Asset classes — Though other robo-advisors typically invest in a mix of stock- and bond-based funds only, TradeKing Advisors also includes funds that invest in real estate and commodities. This adds exposure to “real assets” to the portfolio mix.
- Available for Businesses — This includes accounts for sole proprietorships, partnerships and corporations.
- You can't trade your own account — This won't be an issue if you have no interest in directly managing your account. But should you decide to try your hand at some DIY investing you will have to open a separate account for that purpose.
- The Risk Assist program may be an open question — It assumes there's an ability to time the market by getting out "just in time."
- No Tax-Loss Harvesting (TLH) — This is a trading method that minimizes capital gains taxes by offsetting capital gains by selling losing positions to create capital losses.
- High initial minimum initial deposit on Momentum Portfolios — The $5,000 minimum initial deposit for these portfolio largely excludes small and new investors.
- The $1 per month fee on Core Portfolios is no bargain — If you review the offer quickly, the $1 per month fee on account balances below $5,000 seems like a bargain, but it isn’t. As an example, if you have a balance of $2,500, the annual fee will be $12, and that works out to be 0.48% - nearly double the fee you’d pay on a balance above $5,000. It looks to be a minimum monthly fee for the benefit of the platform.
Keeping in mind the fact that TradeKing Advisors has only been around for about a year, the service looks to be a strong choice for any investor who does not want to get involved with DIY investing – or even for someone who simply wants a portion of their portfolio to be professionally managed.
Both fees and minimum initial deposit requirements are very low, even for robo-advisors, which should be welcome news for small investors and new investors. And the fact that the service bears the TradeKing name is a major advantage from a trust standpoint. Though TradeKing Advisors hasn’t been around for very long, TradeKing has a well-established presence in the investment market.
Why would you want to invest with TradeKing Advisors rather than with other robo-advisors?
- You want a managed account where you have some control over your investments
- You want to invest in more than just stocks and bonds
- You need a managed investment account for your business
- You want the benefits of robo-advisor management within the scope of a trusted investment organization
The Risk Assist feature is definitely an interesting concept, but probably shouldn’t be given major consideration, since it has yet to prove its worth in a major bear market. It will be a downright revolutionary tool if it works as promised in some future bear market.
All in all, TradeKing Advisors is a platform well worth investigating with if you’re looking for professional investment management at a very low fee.