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TD Ameritrade Commission-Free ETFs Going Much Worse

by Harry Sit on October 17, 2017 44 Comments

Since 2010, TD Ameritrade offered commission-free trades on a list of 101 ETFs. Because those ETFs were selected by Morningstar, they had a level of objectivity. The list included over 30 ETFs from Vanguard and over 40 ETFs from iShares, the two leading ETF providers. They covered a good spectrum of asset classes, from broadly diversified to more narrowly focused.

Effective today, TD Ameritrade overhauled its entire list of commission-free ETFs. The number of commission-free ETFs almost tripled to 296. However, the coverage of the new list took a nosedive. All 32 Vanguard ETFs will stop trading commission-free after November 20, 2017. So will 39 iShares ETFs.

The change can be evidenced by not even having an S&P 500 ETF on the new list of nearly 300 ETFs. Most entries on the new list are niche ETFs. A case in point: the new list includes the SPDR® SSGA Gender Diversity Index ETF (ticker: SHE) and SPDR® MSCI Emerging Markets Fossil Fuel Reserves Free ETF (ticker EEMX). I’m all for gender diversity and burning less fossil fuel, but as an investment theme, not so much.

In conjunction with the change at TD Ameritrade, State Street renamed a number of its SPDR® ETFs to SPDR® Portfolio ETFs. The ticker symbols also changed, and their expense ratios are lowered. These SPDR® Portfolio ETFs now trade commission-free at TD Ameritrade. In theory some of the SPDR® Portfolio ETFs would replace the Vanguard and iShares ETFs removed from the TD Ameritrade commission-free list. In practice, those SPDR® Portfolio ETFs have much lower trading volumes.

For example, according to Yahoo! Finance, the predecessor of the SPDR® Portfolio Total Stock Market ETF traded on average about $3 million per day in the last 3 months. By comparison the Vanguard Total Stock Market ETF traded 80 times more per day, and the iShares Total Stock Market ETF traded 14 times more. A lower trading volume means when you buy the ETF, the price you pay beyond the first 100 shares or so can be higher than the true market price.

By this complete overhaul to its commission-free ETFs list, TD Ameritrade positioned itself as a place for niche sector trading, not for plain-vanilla broadly diversified investing. They are saying they want to be more like E*Trade, less like Vanguard, Fidelity, and Schwab. TD Ameritrade is offered as the linked brokerage account by several HSA providers: HSA Bank, Elements Financial, and a startup HSA provider called Lively. This change also made those HSA programs not so great any more.

Not all is lost. If you already have Vanguard and iShares ETFs that will stop trading commission-free in your TD Ameritrade account after November 20, 2017, at least dividend reinvestment will continue to be free. Just new purchases or sales will incur a commission. Customers used to have to enroll in commission-free ETF program before their trades become commission-free. After November 20, 2017, customers won’t have to enroll separately any more. All customers will automatically pay no commission when they trade the ETFs on the new list.

The only thing is the new list doesn’t have any ETFs that I would use. Fortunately I don’t have any account there.

If you have an account with TD Ameritrade you can still make it work by making some adjustments. You can hang on to your existing ETFs and turn on free dividend reinvestment. Limiting the number of trades for your new cash will keep your cost still reasonable. Instead of buying several ETFs every time you have more money to invest, you can add to just one ETF at a time. For a solo 401k, IRA, or HSA, making one contribution per year and doing one trade would cost you only $7 extra.

If limiting the number of trades doesn’t work for you and you’d like to move, Vanguard, Fidelity, and Schwab are the more obvious choices. Among the big three, I’m partial to Fidelity because it manages my accounts well (see Who Manages Your Investments Versus Who Manages Your Accounts). I have a mix of Fidelity index funds and Vanguard ETFs in my Fidelity accounts. I make my more frequent trades in Fidelity index funds there. Once in a while I pay a $5 commission to buy into a Vanguard ETF.

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topics: Investing keywords: ETF, HSA, TD Ameritrade 44 Comments

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Comments

  1. Andy V says

    October 17, 2017 at 7:26 am

    I have one of those HSA-linked accounts, and you elucidated what I’ve been steaming about all morning. What advice would you offer those of us who are “stuck” in this situation?

    Reply
    • FinancialDave says

      October 17, 2017 at 10:19 am

      I personally think its time to vote with my feet. I am seriously looking into closing my TDA account.

      Dave

  2. Mark says

    October 17, 2017 at 7:41 am

    Wow Harry thanks for this post. I have some HSA money with Alliant and they sent me a notice that they are resigning as my HSA custodian and will partner with Healthequity on Nov 9 so I have been considering other HSA providers, this info is very timely.

    Reply
  3. msf says

    October 17, 2017 at 7:48 am

    The number isn’t even tripling. According to TDA’s website on Oct. 16, 2016 (day before the change), they offered 152 equity ETFs, 9 sector ETFs, 95 bond ETFs, 112 international ETFs, and 11 commodity ETFs commission free. Maybe my arithmetic is wrong, but that seems to total 379 ETFs. It seems that TDA is reduced the number of commission free ETFs by 20%.

    The ETF SHE (new as of Oct 16th) was in fact on the old TDA list on Oct 16th (the same list that included all the Vanguard ETFs). Don’t be tricked into thinking that TDA added anything with their new list. They appear to have only subtracted.

    Reply
    • Harry Sit says

      October 17, 2017 at 8:08 am

      I think they included both the old and the new on October 16. To get the old list you’d have to go a day earlier if you have a way to dig up an archived page.

    • msf says

      October 17, 2017 at 8:47 am

      If TDA had included both old and new lists on Oct 16th, then the list would have included both old and new tickers for the SPDR funds, e.g. SPDM (new) and THRK (old). Only the new ticker is there.

    • Harry Sit says

      October 17, 2017 at 11:07 am

      The PDF posted by Andy V in comment #5 shows the 280 ETFs that are added to the new list and the 16 ETFs from the old list that will stay on the new list after Nov. 20. This PDF below shows the 85 ETFs from the old list that won’t go on the new list. The 16 staying and the 85 to be removed make up the 101 ETFs on the old list.

      https://www.tdameritrade.com/retail-en_us/resources/pdf/grid_etfs2017.pdf

    • msf says

      October 17, 2017 at 5:56 pm

      I stand corrected. I checked via the Wayback Machine ( https://web.archive.org/ ) using the input URL https://research.tdameritrade.com/grid/public/etfs/commissionfree/commissionfree.asp to see that as of Sept 29th, TDA offered just 35 equity, 32 bond, 30 equity, and 2 commodity ETFs without fee.

      Thanks for the link to dropped funds.

  4. Doug says

    October 17, 2017 at 7:49 am

    I have my individual 401k through them for the commission free ETF’s. So obviously this is disappointing. What would you recommend as an alternative since I can jump ship? When I was researching a few years ago Vanguard was surprisingly not a great option. I’m invested in BND, VTI, and VEU.

    Reply
    • Erik says

      October 17, 2017 at 8:52 am

      Harry, can you also remind us where you invest your HSA?

    • FinancialDave says

      October 17, 2017 at 12:17 pm

      I can’t understand why Vanguard would not be a good option for anyone wanting low fees and no commissions on their ETF’s or mutual funds. BND, VTI & VEU can all be bought commission free directly from Vanguard. I have had a Vanguard account for around 7 years now and have not had a problem.

    • Doug says

      October 17, 2017 at 12:24 pm

      @FinancialDave, if I recall it’s because the vehicle (INDIVIDUAL/solo 401k) at Vanguard doesn’t allow for the ETF’s to be purchased, and also doesn’t allow for their Admiral shares. So you are stuck with arguably their worst (which is still better than a lot of other places) funds and higher expense ratios. So in my case when I was shopping around, to have a place like TD that allowed for commission free trading of their ETF’s it seemed like a no brainer. There may have been additional negatives to going directly through Vanguard for the individual 401k. I’ll have to research more now that TD has changed their offering. I do use Vanguard for our Roth IRA’s, so it would be nice if they improved their solo 401k product.

    • Andy V says

      October 17, 2017 at 12:25 pm

      The problem I see with Vanguard in this instance is the $20/fund annual fee. It’s probably not the worst thing in the world, particularly compared to the idea of paying $7.95/trade for a few dozen trades/year. The nice thing about TDA prior to this situation re: the HSA connection is having an auto-sweep set up on the HSA and every two weeks buying the relevant Vanguard ETFs.

    • Harry Sit says

      October 17, 2017 at 1:13 pm

      Doug – If you don’t require Roth 401k for your individual 401k, Fidelity would be a good choice. You can find equivalents to BND, VTI, and VEU commission-free there. FSITX, FSTVX, and FSGDX if you like open-end mutual funds, or AGG, ITOT, and IXUS if you like ETFs.

      Erik – See HSA Transfer To Saturna Brokerage Services. If you limit to one trade per year, keeping your HSA at a provider that links to TDA would cost only $7 more than before. HSA Authority would be another choice.

    • Doug says

      October 17, 2017 at 3:02 pm

      Thanks Harry, Fidelity does look like a good option. Those are all very low expense ratio’s and also good ETF options. I guess it’s a complicated question, but do you have a preference (those funds vs those ETF’s)? Is it really just whether you want the ability to trade them during the trading day?

    • Harry Sit says

      October 17, 2017 at 4:00 pm

      Doug – I prefer open-end mutual funds because I can enter the order when the market is closed and not worry about getting a bad price. Rebalancing from one fund to another is also easier for me. I just give the dollar amount and not worry about the share price and the number of shares. If you’d like to trade during the day, those ETFs work just fine because they have good trading volumes.

    • Erik says

      October 18, 2017 at 6:35 am

      Thanks, Harry. I think I’ll explore one or a few mutual funds through Saturna Brokerage Services. I’ll be inactive, because my new employer does not offer a HDHP, so it looks like I’ll be paying a $12.50 annual inactivity fee, which I can stomach. I got that from your comment here: https://thefinancebuff.com/hsa-transfer-to-saturna-brokerage-services.html#comment-19692

    • billfromct says

      October 20, 2017 at 7:32 pm

      I believe the $20 Vanguard account fee is waived if you have over $10,000 in your account or if you sign up for “e-delivery” of statements, annual reports, deposit confirmations, etc. (no more U.S. mail).

      bill

  5. FinancialDave says

    October 17, 2017 at 10:29 am

    Harry,
    Where can you find this new list of 396 ETF’s?

    Reply
    • Andy V says

      October 17, 2017 at 10:31 am

      https://www.tdameritrade.com/retail-en_us/resources/pdf/TDA1000835.pdf

  6. Marty says

    October 17, 2017 at 11:16 am

    TD is acquiring Scottrade in the coming months. As a Scottrade customer I managed to get them to give me a retention bonus in the amount that TD offers new customers. I just have to stick around for 1 year. This news does not matter all that much to me. I like the cash better. Some of you TD customers may consider a similar approach before jumping ship. The cash they offer is worth a lot of no commission trades.

    I am a relatively new Fidelity customer. I am very happy with them and they (sometimes) offer cash bonuses too. I like them far better than Vanguard or Schwab.

    Reply
    • Nancy says

      October 17, 2017 at 5:29 pm

      Hi. How much does one need to have invested at Scottrade to possibly get a retention bonus? How did you go about getting one, did you call Scottrade and ask, or threaten to leave? Thanks.

    • Marty says

      October 18, 2017 at 11:47 am

      Nancy,
      I’ve had an account with Scottrade for at least 10 years. I do less than 5 trades per year so they don’t make much money off of commissions but I have several hundred K in investments there. They’ve been calling me for months about the transition and seem to be getting pressure to sell investment services or get new assets transferred in. I’ve politiely said I am happy where I have different accounts now and want to see how things go when TD takes over. I patiently waited.
      THey called me again to try to get more business and I politely mentioned I saw TD pays cash for new accounts. I told them as a long time customer I wanted the same bonus to stick around or I can go to Fidelity who always pays me to move assets over and they have great customer service, full range of low cost products and so forth. They called me back with an hour giving me a $600 retention bonus. I told them that was fair and thank you. No threats ever…just the truth. You can get paid by brokers to transfer accounts. They know this. It’s no secret. Usually you only have to stick around for a year. I will see how it goes with the transition or call my rep at Fidelity. He has always paid me for additional assets and never pushes to sell me anything. I am self directed but lilke what they have in case I need more help as I age. They even have a 2% cash back credit card! I have already been consolidating accounts to simply my life. (I also like taking these cash bonuses to spend on “toys” for myself.)

      Over the years I’ve seen bonuses around from $300 – $1200 depending upon account size.

  7. Svaraman says

    October 17, 2017 at 3:21 pm

    For about a year now, I’ve been considering consolidating all of my assets at Fidelity. This announcement gave me the push I needed to start that process. I’ve started the transfer from TD Ameritrade to Fidelity. Hopefully in a few weeks I will be free of TD Ameritrade.

    Until now my biggest complaints about TD Ameritrade were:
    1. Really poor customer service
    2. Constant issues with TD saying my email address isn’t valid. They keep triggering the bandwidth limit at my ISP by dumping too many “your statements are available” notices all at once. As a result, I get three notifications via USPS each month that they tried to send me email notification but it bounced. This is just stupid.
    3. They are unable to provide a single integrated statement every month. Instead I get one statement for each of my three accounts.
    4. The web trading platform hung up on me once and as a result I made the same trade twice. Not cool!
    5. Under the hood, there is a separate website for each account. One can “link” the accounts loosely but they’re not integrated like they are at Fidelity.
    6. For whatever reason, the reinvestment price I get from TD Ameritrade is typically higher than from Fidelity.

    Reply
    • Sridhar Sarnobat says

      October 25, 2017 at 1:22 pm

      I’m going to do something similar, even though I’ve been happy with TD Ameritrade minus the loss of free IVV trades.

  8. Svaraman says

    October 17, 2017 at 3:23 pm

    @FinancialDave: I had an account at Vanguard, but the customer service was so poor, that I closed the account and moved everything to Fidelity. I don’t regret that decision.

    Reply
  9. Eric says

    October 17, 2017 at 6:11 pm

    In case others are thinking about moving out of TDA if you have Apex status (100k balance or at least 5 trades per month) there is no account closure/transfer out fee.
    The representative I talked to said that the 100k balance requirement was required for each account separately (brokerage, Roth IRA, traditional IRA etc) but they did extend the service to an account of mine that did not quite meet criteria due to my balance in another one.
    Otherwise it is $75 per account to fully transfer out.

    Reply
    • Svaraman says

      October 17, 2017 at 7:34 pm

      @Eric: Thanks for that information. It’s really odd that TD gives one Apex status by virtue of your entire account balance but when one decides to transfer out, Apex only applies on a per account basis. Classic TD…

      I got something like $600 as a bonus for opening accounts at TD two years ago. I guess it’s worth $150 (two accounts don’t meet the minimum) to me to not have to deal with the TD incompetence any longer.

      I feel like TD did me a favor by giving me the push I needed to move on.

  10. Svaraman says

    October 21, 2017 at 8:12 pm

    FWIW, I paid no account closing fees at TD. The Apex status is supposed to be based on the total of all accounts. One of my accounts was mis-coded so I was charged $75 to close that account. TD corrected that error and refunded me $75.

    If you’re charged an account closing fee, I’d ask how your accounts are coded.

    This is the kind of customer service issue I’ve come to expect from TD. Glad to be leaving.

    Reply
  11. Sridhar Sarnobat says

    October 23, 2017 at 2:33 pm

    What’s the best replacement for IVV (or SPY) which TD Ameritrade won’t offer commission free anymore? I was buying IVV regularly. I can’t afford VOO. Fidelity still offers IVV but there are some other issues with Fidelity.

    Reply
    • FinancialDave says

      October 23, 2017 at 4:06 pm

      I think the best option for SPY is to use the Total Stock Market ETF, which was VTI, but is now SPTM in the commisssion free arena of TDA.

    • Sridhar Sarnobat says

      October 23, 2017 at 4:13 pm

      SPTM’s expense ratio is 0.03% which looks good. But is that a percentage of the price of the asset ($32)? If so, that’s still a lot higher than SPY / IVV’s 0.08% as a percentage of $250 🙁 Or is it a percentage of your assets?

      I may also be mistaken about VOO. I thought you could only buy it at a minimum volume of $3000 but either I was mistaken or they’ve changed their policy.

  12. FinancialDave says

    October 23, 2017 at 10:41 pm

    SS,
    The expense ratio is figured on the market value owned. For instance if you own $10,000 of an ETF with a .08% ER you will lose $8 per year to expenses. However, there isn’t an ETF index built that can track it’s index within .08% year in and year out, so I wouldn’t get to overly concerned about a .05% difference in expense ratios.

    Since VOO is an ETF it is sold on a per share basis like a stock, so you can buy or sell as little as 1 share of it.

    Reply
  13. Mike says

    October 27, 2017 at 12:22 pm

    I would love to move my HSA (@ HSA Bank) over to join the rest of my assets @ Fidelity, but they only work with HSA accounts from larger corporate accounts. In the past, when I’ve requested free trades from my TDA rep, he gave them to me no questions asked. YMMV.

    Reply
  14. Brandy says

    October 27, 2017 at 6:26 pm

    Hi Harry
    We have an employer provided HSA through HSA bank/TDA.
    Currently our account has only vanguard funds. With new contributions, based on boggleheads discussions was thinking of putting all in SPTM. But was confused re what I need to do re vanguard funds that we currently own – sell and buy SPTM or hold on..
    Am I correct, that your recommendation would be to hold on to the vanguard funds and not sell them ? Can you expand why it would be better than selling now prior to Nov 20, when those would be charged fees.
    Thanks

    Reply
    • Harry Sit says

      October 28, 2017 at 11:47 am

      Holding the Vanguard ETFs and reinvesting dividends cost you nothing. When you sell them eventually, which can be many years from now, you will pay $7 each. It’s low enough not to worry about. Vanguard’s better management of the funds will probably more than make up for it over those many years.

    • brandy says

      October 28, 2017 at 12:00 pm

      Thanks,appreciate your insight.

    • Erik says

      October 30, 2017 at 6:24 am

      That’s great to know. Since I’m no longer on a HDHP and have an inactive HSA invested through TDA, I’ll just keep my VTI ETF as is.

  15. glamke says

    October 31, 2017 at 2:23 pm

    A semi backpedal today. Not as half assed as the “enhancement” but close.

    https://triradiate.wordpress.com/2017/10/31/td-ameritrade-backpedals-kinda/

    Reply
  16. John says

    November 28, 2017 at 2:51 pm

    It’s hard to imagine a broker could triple the number of commission-free ETFs it offers and come up with an inferior platform. TD Ameritrade made it look easy.

    Reply
  17. glamke says

    November 29, 2017 at 11:28 am

    TD adds another steaming pile of excrement to their already formidable accumulation of ETF Egesta (yes, I looked that one up and am loving it).

    https://triradiate.wordpress.com/2017/11/29/td-ameritrade-commission-free-etf-shenanigans-continue/

    Reply
  18. Nancy says

    December 12, 2017 at 4:54 pm

    hi

    I’m stuck with TDA and HSA bank, what would be the best non-commission ETF?

    Also, do I need to enroll in autosweep? (I’m new to this, please clarify autosweep)

    thanks for your insights

    Reply
    • FinancialDave says

      December 13, 2017 at 9:55 am

      I recently looked at this and here are some ones you might think about:

      – SPTM Total Stock Market
      – SPYD SP500 Dividend
      – SPYV Large Cap Value

      I would also recommend you try and keep at least 20% cash in your HSA for healthcare emergencies.

  19. glamke says

    December 19, 2017 at 2:29 pm

    Good thing they sent out a reminder of what morons they are, in case anyone forgot…

    https://triradiate.wordpress.com/2017/12/19/reminder-from-tdameritrade-were-boneheads-in-case-you-forgot/

    There is no such thing as forgiveness. People just have short memories.
    -Rust

    Reply

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