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TD Ameritrade slashes minimum balance for robo advice

TD Ameritrade is looking to make its robo platform more appealing to younger, less affluent investors by slashing its minimum account balance to $500, provided clients set up recurring deposits.

The move is a dramatic reduction in the minimum investment requirement for Ameritrade's Essential Portfolios, which had previously been set at $5,000.

"We're always looking for ways to break down investing barriers and empower our clients by helping them take control of their financial lives," Peter deSilva, TD Ameritrade's president of retail, says in an emailed statement.

"We believe that every investor should have access to a professionally managed portfolio, regardless of their wealth or income level, and lowering the minimum for Essential Portfolios is a natural step in that direction," deSilva says.

TD Ameritrade building TDAI Bloomberg people walking April 22, 2019

The management fee for Essential Portfolios will hold steady at 0.3%, and Ameritrade stipulates the new reduced minimum is conditioned on clients setting up recurring deposits that continue until the account balance reaches $5,000.

Still, reducing the entry barrier brings Ameritrade closer in line with lower-minimum offerings in the highly competitive digital advice space. Wealthfront, for instance, has a comparable $500 minimum investment, but does not require recurring contributions. Other popular robos, such as Betterment and Ellevest, have a basic online investment service with no minimum requirement, and offer premium services with higher minimum balances. Wealthfront also expands its service menu for higher account balances.

At the other end of the spectrum, Vanguard's robo platform, Personal Adviser Services, requires a minimum account balance of $50,000, and offers a tiered schedule with discounted management fees for account balances above $5 million.

TD Ameritrade's move also distinguishes it from rival Schwab's robo offering, Intelligent Portfolios, which requires a $5,000 minimum balance. Fidelity, by contrast, offers its Fidelity Go robo service with no minimum account balance requirement.

TD Ameritrade is positioning its move as a play for the younger and less wealthy investors for whom the low- or no-minimum robos are particularly appealing.

In a Harris poll that TD Ameritrade commissioned earlier this year, 24% of the respondents said that minimum balance requirements were a barrier to investing. Of the millennials in that survey, 37% said they would have started investing earlier if the minimum balance requirements were lower.

"High investment minimums can be challenging for investors who are just starting their investing journey," Keith Denerstein, TD Ameritrade's director of investment products and guidance, writes in an email. "Investors recognize that the earlier they're able to start building a diversified investment portfolio, the better positioned they will be to take control of their financial lives."

The firm is also pitching the move as expanding access to the investment options it offers that are ordered around environmental, social and governance principles, an area of increasing investor interest, according to deSilva.

"Historically ESG investing has been available to high net-worth individuals, but investing according to your values should be an option for everyone, and we’re proud to make that possible with this lower minimum," he says.

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