TD Bank may have a branding issue with its new automated investing service.
The bank this week launched the aptly named TD Automated Investing, billed as its first robo advisor, and TD Automated Investing Plus, a hybrid robo that provides access to a team of human advisors.
With a risk tolerance questionnaire matching clients to one of seven portfolios made up of ETFs and mutual funds that is automatically monitored and rebalanced, it’s a fairly standard entry to an already crowded digital advice marketplace. It’s a bit expensive — Automated Investing charges a $75 minimum annual fee, meaning clients would need $25,000 in the account to break even with the standard fee of 30 basis points, as Wealth Consulting Partners president Gavin Spitzner pointed out — but otherwise fairly in line with the rest of the industry. One could even criticize TD Bank for being so late to the game.
While it’s true Automated Investing is the first robo directly owned by TD Bank, it is not the first in the Toronto-Dominion Bank extended family. TD Ameritrade launched Essential Portfolios in 2016 and amassed $1.6 billion in assets by June 2020, according Backend Benchmarking’s “Robo Report.”
Charles Schwab acquired TD Ameritrade in 2019, and Essential Portfolios are reported as part of Schwab’s digitally advised assets. Before the deal, TD Bank owned 43% of TD Ameritrade. It now holds 13% of the combined company, according to Bloomberg.
It’s unclear what relationship, if any, TD Bank had with TD Ameritrade’s robo advisor or if it recommended the service to bank clients interested in automated advice. TD Bank declined to answer questions, and a Charles Schwab spokesperson says the company doesn’t have data on how many Essential Portfolios clients have a relationship with TD Bank.
If TD wasn’t at all recommending clients, then it is incredibly late to the digital advice party. If it was, perhaps the bank is hoping to bring some of those investors and assets back home? From an outsider’s perspective, it does look like the TD Bank is at least somewhat trying to replicate what TD Ameritrade offered. Automated Investing and Essential Portfolios offer similar services and launched with identical asset minimums ($5,000) and fees, though Essential Portfolios did not include the $75 minimum.
New robo advisors already have a tough time standing out in the highly competitive robo market, but Automated Investing’s positioning may also cause some confusion among consumers — especially those with both TD Bank and Ameritrade accounts. Even some industry analysts are puzzled by the new product’s launch.
“I don’t quite understand. I do not see how it will be differentiated from Essential Portfolios,” said David Goldstone, Backend Benchmarking’s manager of research and analytics. “This must be a part of the branding strategy as Schwab looks to consolidate TD.”
As for Essential Portfolios, Schwab has already started a quiet sundown of the robo. It stopped accepting new clients in March, and existing accounts will be converted to the Schwab platform along with the rest of TD Ameritrade, a Schwab spokesperson said.
The company is still aiming to have the conversion completed in an 18- to 36-month timeframe from when the deal closed in October 2020.