E*TRADE Adaptive Portfolio is E*TRADE’s new robo-advisor service providing you with professional investment portfolio management for a small fee. The Adaptive Portfolio is billed as a “self-adjusting portfolio.” That means you input your goals, investment timeline and risk tolerance, and E*TRADE Capital Management designs a custom investment portfolio for you. It adapts to market changes by rebalancing as needed.
The portfolio provides a fully managed investment account that’s perfect for a person who wants to invest but does not want to get involved in the daily details of the process. All investment selections and subsequent rebalancing are handled by management.
How Does E*TRADE Adaptive Portfolio Work?
E*TRADE Adaptive Portfolio starts with a three-step process:
- Step 1: You complete your investor profile. This is a series of questions designed to establish your goals, time horizon and risk tolerance. Your portfolio is created based on this information.
- Step 2: Review your investment proposal. A diversified portfolio that fits your investor profile is designed, and you can choose between a portfolio of all exchange-traded funds (ETFs) or a mix of ETFs and mutual funds.
- Step 3: Implement your portfolio. If you accept the portfolio offered and meet the minimum investment requirement, you can activate the portfolio.
Adaptive Portfolio rebalances your portfolio based on E*TRADE Capital Management’s portfolio allocation drift parameters. Your portfolio “self-adjusts” by comparing your portfolio allocations to the target allocation drift parameters each trading day after the markets close. When necessary, trade orders are submitted the following trading day to bring the portfolio into alignment with target allocations.
Unlike traditional managed portfolios, E*TRADE Adaptive Portfolio owners do not have an individual portfolio manager. Instead, portfolio management is handled by E*TRADE Capital Management through its Investment Policy Committee and with support of Investment Strategist. They will select, remove and add portfolio holdings and determine rebalancing methodology.
Two Types of Investment Portfolios
You can choose between a portfolio that is comprised entirely of ETFs or one that includes a combination of ETFs and mutual funds.
The all-ETF portfolio is comprised of indexed funds with very low operating costs, designed specifically to match the performance of the general markets. It offers an opportunity to achieve broad diversification at very low cost.
The hybrid portfolio consists of both ETFs and mutual funds. It uses ETFs to provide low-cost diversification, but adds mutual funds if it is determined actively managed funds may add value to the portfolio. This provides the investor with an opportunity to pursue investment returns that have the potential to outperform the general markets.
Very little cash is held in either type of portfolio. In fact, the cash position is limited to a 1% allocation. Any cash beyond that is moved into funds.
E*TRADE Adaptive Portfolios are totally managed accounts. That means there is no self-directed trading, and you cannot hold investments in the account that have not been specifically chosen for the portfolio. If you want to hold other securities, you can do so through another brokerage account with E*TRADE.
E*TRADE Adaptive Portfolio Features and Pricing
|Accounts Available||Traditional IRA, Roth IRA, Rollover IRA, Custodial, Individual and Joint|
|Automatic Deposits||Yes — Daily, Weekly, Biweekly and Monthly|
|Mobile App||Yes — Apple iOS and Google Android|
|Customer Service||Phone — M-F 8:30A-8:30P ET and Live Chat — 24/7|
ETFs used. E*TRADE Adaptive Portfolio uses funds that provide exposure to various market segments. Your portfolio is typically comprised of six to eight funds, whether it’s the ETF portfolio or the hybrid portfolio. The mix can include large- and small-cap stocks, emerging markets, international markets, intermediate- and short-term bond funds, Treasury Inflation Protected Securities (TIPS) and high-yield bonds.
Portfolios are comprised of funds from iShares, Vanguard and other fund families, while mutual funds are provided by a larger number of fund families. The Adaptive Portfolio avoids the use of E*TRADE’s proprietary funds in constructing these portfolios.
Account protection. Accounts are protected by SIPC, which provides coverage for up to $500,000 per account, including $250,000 in cash. This coverage provides protection against broker failure and not against market value fluctuations.
E*TRADE provides additional brokerage protection. They have additional coverage from London insurers with an aggregate limit of $600 million to pay amounts in addition to those returned in a SIPC liquidation, provided that (1) the combined return from the trustee distributions, SIPC and London to any customer does not exceed $150 million, and (2) as a sub-limit, return of cash to any customer by London does not exceed $900,000. Like SIPC, this coverage does not protect against loss of the market value of securities.
Clearing agency. E*TRADE is self-clearing through E*TRADE Clearing LLC.
Annual fees/cost. E*TRADE Adaptive Portfolio charges an annual “advisory” fee of 0.30%. The fee is charged to your portfolio at the beginning of each quarter. You will also pay fund-related expense fees, as will be the case with all robo-advisor services. Those fees will be slightly higher on the hybrid portfolio, since it also includes mutual funds.
Minimum deposit and account balance: $10,000. If your account balance drops below this level, your account will remain open. However, E*TRADE will eventually request that you add additional funds to bring the account up to $10,000. This is felt to be the minimum balance necessary in order to maintain the portfolio.
E*TRADE Adaptive Portfolio Current Incentive Offers
E*TRADE Adaptive Portfolio is offering two incentives for those who open a new account, and you can participate in both.
Advisory Fee Waiver. If you open an Adaptive Portfolio account before the end of 2017, E*TRADE will waive the 0.30% annual advisory fee for the first six months.
The advisory fee waiver does not apply to E*TRADE Capital Management’s Managed Investment Portfolios and Unified Managed Accounts advisory programs or accounts previously enrolled in Online Managed Investment Portfolios that were converted to Adaptive Portfolio.
Cash Credit. E*TRADE is also offering a cash credit of up to $1,500, based on the amount of deposits or transfers of new funds or securities from accounts outside of E*TRADE.
The cash credit looks like this:
|Account Balance||Cash Credit Amount|
|$500,000 or more||$1,500|
|$250,000 to $499,999||$1,000|
|$100,000 to $249,999||$500|
|$25,000 to $99,999||$200|
|$10,000 to $24,999||$100|
This offer also expires at the end of 2017. New funds or securities must be deposited or transferred within 45 days of enrollment. New funds or securities must remain in the account for at least six months.
E*TRADE Adaptive Portfolio Mobile App
E*TRADE Adaptive Portfolio is available for mobile apps for both iPhone and Android, as well as tablets. The apps provide:
- Research for stocks, ETFs and mutual funds, including E*TRADE’s All Star Fund List and screener
- Real-time streaming quotes, including Level II, and charts
- Enhanced quote details for stocks, ETFs mutual funds, options and indexes
- Conditional orders, including one-triggers-other (OTO), contingent and stop-loss
- Mobile check deposit by snapping a picture
- Customizable dashboard that can include your top portfolio performers, open orders banner, portfolio and watchlist-related news stories and more
- In addition to the above, the iPhone and iPad apps provide logon using Touch ID and Security ID
- Hands-off management — If you're looking for someone else to handle your investments, E*TRADE Adaptive Portfolio is for you.
- Excellent customer service — E*TRADE has consistently earned high marks in the area of customer service. I contacted them from their chat line and received an immediate response.
- Brick-and-mortar locations — E*TRADE has 30 office locations in 17 states. That's something other robo-advisors don't have.
- Generous bonus offer — The bonus offer is quite generous, up to 1% cash plus half a year’s fee waived.
- High initial account minimum — The $10,000 minimum initial account deposit is high for new and small investors.
- Management fee is high for a robo-advisor — The fee of 0.30% is comparable to some other robo-advisors, but is by no means the lowest. For example, Betterment charges a fee of 0.15% on portfolios of $100,000 or more, while Wealthfront is at 0.25% across the board, with the first $10,000 managed free.
- No financial consultants — Adaptive Portfolio doesn’t offer the kind of human contact that comes with traditional investment management services. But then you'd pay a lot more for that privilege than you will pay with Adaptive Portfolio.
- No tax-loss harvesting — Other robo-advisors, including Betterment and Wealthfront, offer tax loss harvesting, which is a process by which some investment positions are sold at a loss in order to offset gains elsewhere. This strategy reduces short-term capital gains, which are subject to ordinary income tax rates. At this time, E*TRADE Adaptive Portfolio does not offer this service.
E*TRADE Adaptive Portfolio offers most of the advantages that are typical of robo-advisor investment management platforms. However, the fees are little bit above the norm, while the minimum initial required deposit is definitely on the high side. A tax-loss harvesting service would be a good addition to the mix.