Morgan Stanley Core Portfolios Review

Pros and Cons of Core Portfolios

Types of Clients

Morgan Stanley exclusively offers Core Portfolios to individual clients, both of average and above-average net worth, per the firm’s brochure for the product. The company doesn’t allow institutional investors, such as banks, charitable organizations, or corporations, to enroll in the program. This is common for robo-advisor products, which are typically geared toward people who want to begin investing passively at a low cost.

To enroll, you must invest a minimum of $500 in your account. The company notes that you must meet this requirement as long as you have the account. If you dip below this, Morgan Stanley may stop managing your portfolio.

How Core Portfolios Works

Core Portfolios is a robo-advisor tool offered by Morgan Stanley through the E*TRADE platform that automatically manages and implements an investment strategy for your portfolio. It does this on a discretionary basis, meaning it will have the authority to make trades on your behalf without you signing off for approval. Before using, therefore, you’ll need to consider whether you’re comfortable with a computer algorithm managing your account.

As part of the signup process, you’ll need to provide E*TRADE information about yourself by answering 11 questions. Your responses will work together to give the firm and its software an idea of you as an investor so it can recommend a viable strategy.

Here are some of the key pieces we had to provide when filling out a sample questionnaire:

• Goals (e.g., saving for retirement, building a substantial portfolio, etc.)
• Initial deposit sum
• Recurring deposit amount and schedule
• Time horizon
• Risk tolerance
• Preferences about investment focus (e.g., socially responsible investing, smart beta, etc.)

After answering the questions, you’ll receive a recommendation for a portfolio strategy based on what you’ve provided. It will break down the projected asset allocation and illustrate how your money might grow over the time range target you prefer. The firm also allows you to see other strategies, including ones that carry more or less risk than the one you received.

Once you’ve created an account, the Core Portfolios software will build your portfolio according to the plan you’ve selected. As mentioned, it will do this on its own and won’t consult you for approval. According to Morgan Stanley’s client-facing brochure for the product, your investments will comprise low-cost exchange-traded funds (ETFs), containing a mix of fixed-income and equity securities.

Over time, the robo-advisor will automatically rebalance your account to ensure it adheres to the original goals you set. It can also look for opportunities to harvest your tax losses, which is a strategy of offsetting the amount of capital gains taxes you pay. However, you must opt in to this service to begin receiving it.

Fee Structure and Cost

Core Portfolios utilizes a wrap fee system, meaning that it includes the costs from various sources, such as portfolio management and transaction expenses. It charges a monthly in advance fee based on the value of your assets under management (AUM). The annual fee to use the service is a flat 0.30% AUM.

Investment Philosophy

As mentioned, it takes a great deal of trust to allow a computer algorithm the responsibility of managing your assets. This makes it highly important to understand the investing philosophy it will use as it builds your portfolio.

On the E*TRADE website, the company says that Core Portfolios aims to use risk mitigation strategies such as diversification and asset allocation. This is one of the reasons it primarily invests in low-cost ETFs.

Ultimately, however, keep in mind that the approach the software uses relies on the information you’ve inputted when signing up, as well as the investment strategy you select. It’ll be up to your time horizon and overall risk tolerance on whether to take an aggressive, balanced, or conservative approach. Then, the service will follow your objectives, while also using its algorithms to ascertain the ideal rebalancing measures.

Disclosures

Because of its status as a registered investment advisor (RIA) with the U.S. Securities and Exchange Commission (SEC), Morgan Stanley must report all legal events involving it or its representatives on its Form ADV. Per FINRA’s BrokerCheck, the firm has 170 disclosures. 60 of these are regulatory events, which refer to disciplinary or legal actions against the firm.

Customer Service

The best way to receive customer service for Core Portfolios is to use either Morgan Stanley’s or E*Trade’s contact page. From there, you can gain quick answers to frequently asked questions and access phone numbers related to the services you require.

How to Start an Account

There are a couple of ways to become a Core Portfolios client. You could visit Morgan Stanley’s informational page about the product, where you can scroll down and click the “Get Started” button. This will take you to the signup questionnaire on E*TRADE’s website.

Similarly, you could also go to E*TRADE’s page for the service, which includes several “Get Started” options. These also take you into the list of signup questions.

Methodology

This review is based on publicly available information directly from Morgan Stanley, E*TRADE, and the SEC. Neither the firm nor its representatives have any say on what we’ve included on this page.

Frequently Asked Questions

Does Core Portfolios act as a fiduciary?

Because Morgan Stanley is registered as an investment advisor with the SEC, the firm, its employees, and its robo-advisor service must carry out a fiduciary duty. This means it must act in your best interest while maintaining and investing your assets. It must also avoid conflicts of interest and alert you if any arise.

Is Core Portfolios worth it?

Morgan Stanley’s Core Portfolios is worth it for people who want a cost-effective option to begin building a portfolio. However, it largely involves letting a computer decide which investments you own and how long you should hold onto them. While this can make investing easier in some cases, it can also be unsettling to those who value human expertise or hearing explanations for each management decision. Consider that with this product, you won’t be able to meet with an in-person advisor or consult with one on the phone.

How much money do you need for Core Portfolios?

To enroll in Core Portfolios, you’ll need a principal investment of at least $500, which is low, especially compared to in-person advisor firms. However, keep in mind that other robo-advisor providers, such as SoFi Wealth and Fidelity Go, don’t require an account minimum to sign up.