Investment Workshop 47: Good Bye TD Ameritrade

Wanderer
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Wanderer

The Wanderer retired from his engineering job at a major Silicon Valley semiconductor company at the age of 33. He now travels the world, seeking out knowledge from other wealthy people, so that he can teach people how to become Financially Independent themselves.
Wanderer
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Hello again and welcome back to the Millennial Revolution Investment Workshop! New readers, please click here to start from the beginning.

Hi all,

While we were at Ecuador partying it up at Chautauqua, our readers started getting a strange email from TD Ameritrade. Here’s a screenshot of what it said…

 

Great. So what the Hell does this mean? Well…

Goodbye Index ETFs

In short, they’re revamping their list of ETFs eligible for their commission-free ETF program. And from reviewing the changes, it ain’t good.

To recap, when we started running this workshop, we went through all the ETFs available to both our Canadian and American readers and came up with a list. On the US side, it was…

ETF Symbol Description
BND Vanguard Total Bond Index ETF
VTI Vanguard Total Stock Market ETF
VEU Vanguard FTSE All-World Ex-US Index ETF

All 3 were carefully selected to give you the lowest-cost exposure to the bond and equity indexes you needed to build a portfolio to retire with. And when I saw low-cost, I mean it. The MERs for each ETF range from 0.04% to 0.1%.

As a result of that, our American workshop portfolio is up a respectable 6% YTD.

But it’s not just low-MERs that are important. Trading costs are important as well, especially in the accumulation phase of your career where you typically are adding money into your portfolio every 2 weeks. Your typical bank-run trading platform will charge anywhere from $5 to $15 per trade, and if you’re already retired that may not be such a bad thing since you only tend to rebalance once a year. But if you’re wasting $15 PER TRADE every two weeks, that adds up quickly and can easily blow up your retirement.

That’s why we partnered up with TD Ameritrade, which provided commission-free ETF trading for a select group of about 100 ETFS, with the ETFs we were using being among that list of 100 commission-free funds.

Then this update came, in which they were happily touting that they were expanding their commission-free ETF list to 296 funds. The only problem?

They removed the low-cost Index funds we were using.

And what did they replace them with?

Basically, it looks like high-fee actively traded ETFs that I wouldn’t touch with a ten foot pole. In fact, I don’t see a single S&P 500 Index fund at ALL in their new updated list!

What Does This Mean?

While we can sit here and speculate on why they made these changes (*cough* kickbacks *cough*), the fact of the matter is that building a retirement portfolio on a platform that charges $6.95 per trade is no longer feasible. Hell, if I were to pay this amount every time I did a DCA buy, I would have paid $20.85 every time, or a commission of $20.85/$500 = 4.2% of my entire portfolio in trading costs! Goodbye 6% gain!

So what does this mean?

We can no longer recommend TD Ameritrade on Millennial-Revolution.com.

As a result, over the next few days/weeks, I will be going back through this site and scrubbing any reference to TD Ameritrade on our workshop, our blog articles, and anywhere where we recommended this company. Maybe they’ll change their ways in the future to once again be a good product for people seeking early retirement, but until then I can’t in good conscience recommend them anymore.

What Should I Do?

For now, nothing. This change doesn’t officially take into effect until November 20, 2017, so until then no immediate action needs to be taken. For me, I’ll need to go out and do some research to find a new brokerage account that doesn’t charge a ridiculous fee to trade ETFs. If anyone knows of any, please let me know in the comments so I can add it to my list to investigate.

And it goes without saying that for our Canadian readers, you don’t have to do anything at all. This change affects our American readers only.

What Does This Mean for Millennial-Revolution.com?

I’m not gonna lie. This is a wrench that got thrown into the gears.

Here on this site, we pride ourselves on teaching people how to save, how to invest, and how to retire in your 30s for FREE. Because a part of the ethos of this site is that we believe this knowledge is a human right rather than something only available to privileged already-rich people with money to blow.

And a big part of that was relying on affiliate income from companies we used ourselves and trusted. We would recommend a product that we believed in, they would pay us a commission for the referral, and we could continue doing all this teaching while never charging our readers a dime.

This change by TD Ameritrade blows up a big part of our affiliate income, which we rely on to offset the costs of running the site as well as the REAL MONEY we use to run the workshop investments.

But sometimes when you’re running a blog, a situation comes up where you have to choose between the blog earning money and standing up for your audience. And we here at Millennial-Revolution.com will choose to stand up for our audience every single time.

Because we’re FI! We don’t need the money to fund our living expenses!

So while other bloggers who are on their way to FI or who are writing about paying off their debt or whatever may be tempted to keep taking that sweet sweet affiliate money in exchange for their silence, we will simply go Fuck THAT Noise. We only recommend products that are good for YOU, not good for US. So that’s why we decided to announce this the way we did. You came here for transparency, and transparency is what you’re going to get it.

But that doesn’t mean we’re sitting on our laurels. For some time now we’ve been kind of nervous relying too much on affiliates to sustain this site. FIRECracker in particular has been expecting one of the affiliates to try to pull a fast one like this for some time now. It’s just part of her suspicious nature, and unfortunately she’s been proven right.

So as a result, we’ve been hard at work developing extra cool features for the site that you might find interesting. We were hoping to launch these some time next year, but now it seems an earlier reveal might be in order. So stay tuned!

WORKSHOP TOOLS:


How much does it cost to participate in this investment workshop? NOTHING. Because that's how we roll. All we ask is that you sign-up using the following affiliate links to keep it free forever:


For Canadians:
Questrade

For Americans:
1) TD Ameritrade
NOTE: Due to their recent changes for their commission-free ETF program, we can NO LONGER RECOMMEND TD Ameritrade. We are currently seeking out a new brokerage to partner with and will let you know when we find one.
2) Personal Capital


Disclaimer: The views expressed is provided as a general source of information only and should not be considered to be personal investment advice or solicitation to buy or sell securities. Investors considering any investment should consult with their investment advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decisions. The information contained in this blog was obtained from sources believe to be reliable, however, we cannot represent that it is accurate or complete.

101 thoughts on “Investment Workshop 47: Good Bye TD Ameritrade”

  1. Waiiiiit a minute. Stop right there people. I know you are all fans of Vanguard but Ishares commission free ETFs are equal or in the case of ITOT even cheaper than VTI. Source:
    http://etfdb.com/tool/etf-comparison/ITOT-VTI/

    So stop complaining and do some research ! We don’t need vanguard (which is actually killing all brokerage companies) to build a exact same or cheaper portfolio with Ishares ETFs.
    I’ve always been a personal fan of you FireCracker but this time I have to strongly disagree with all this crying up above ! I Wouldn’t and I won’t move out from TD Ameritrade, period!

    1. Calm down man, they did their research. Look at the list of ETF’s before spouting off and you might see they’re a bunch of garbage abstract ETF’s nobody would want when building a diverse, low cost portfolio.

      iShares are a fine company, but their most popular ETF’s are not available on this list of free ETF’s either. ITOT is not there and neither is IVV, to name a couple.

      1. I’m a fan of iShares as well. I just wish some of their GOOD ETFs actually made it into the list.

        This is not a Vanguard or an iShares thing. This is a TD Ameritrade thing.

        1. True Wanderer. I actually hadn’t noticed their good etfs didn’t make to the TDA list.
          Point taken, I’d recommend Fidelity as their have all these good Ishares ETFs and a bunch more of Fidelity-owned passive ETFs. Now that I haven’t seen my good etfs on TDA list I might close my account too

  2. You guys rock. For what it’s worth, if you decided to go the Patreon route I would sign up in a heartbeat. You do awesome stuff and I like being able to support people directly when they put a lot of work into something I get to enjoy.

  3. I’d heard about this last week (from following @MichaelKitces on the twitters) but thought to myself “hurr, we use Vanguard and don’t buy ETFs, so it doesn’t apply!”

    …then as soon as I saw your post I remembered most of our HSA is invested in $VTI through TDA’s commission-free program, and their notification email likely got lost in my wife’s inbox clutter.

    homer_simpson_doh.gif

    I hope you find something reasonable for my fellow Americans to use. Thanks for fighting the good fight! Y’all are awesome.

    1. This was a big disappointment with TDA, I’m not gonna lie. In fact, right now I’m at Fincon where TD Ameritrade has a booth. Maybe I’ll got over there and give them a piece of my mind…

  4. As others have said, great job putting us first! At the risk of sounding obvious – why not go with Vanguard? Many others have extolled the virtues of the structure where the funds own the company. Trying to buy Vanguard Funds through others means you are likely always buying loss leaders. There is only so much loss a trading company would be willing to take so its inevitable that fees would eventually creep in.

    The other two I would look at are -1) Fidelity – again they have loss leaders but at least they are Fidelity (TM) funds. They are sometimes cheaper than Vanguard and likely to stay because of the TM. 2) Schwab – they pride themselves on having the lowest cost index ETFs, or so their advertising says.

    Blackrock is also rock bottom but I’m not sure you can get in as an individual and outside of a plan.

      1. I applaud your decision! Kudos to you.

        In all honesty, the only company that is owned by its investors is Vanguard, and therefore it is the only company that has no inherent conflict of interest around its investors and is the only one run solely for our benefit. Other companies such as Ameritrade and Fidelity may offer index funds, but only Vanguard is investor-owned and therefore not beholden to shareholders, and therefore devoid of the temptation to do what Ameritrade did. My guess is you might get a similar sponsorship from Fidelity or Etrade or a variety of other platforms, but that ultimately they will make similar moves as Ameritrade for the benefit of their shareholders.

        It’s going to be hard- you want and need sponsorship, but the only way to get that on an ongoing basis is from a profit-seeking company, and the way a company makes profits is off of the backs of its investors.

  5. Hell yes to transparency, responsibility, and the free sharing of knowledge! Kudos to you guys and I look forward to your recommendations in the future.

  6. This blew up on the bogleheads.org forum. There were alternatives discussed. I’ll browse through and reply to this same message with what I find.

  7. I use Scotia iTrade. They have a bunch of commission free ETFs. Not sure what your view is on them. Maybe Questrade is better?

    1. Never used iTrade (and I bank with Scotiabank). Their list of ETF’s seems pretty limited to me, which ones do you own precisely?

      Not going to lie I’m a big fan of Vanguard and there are basically none on the available list. Even the iShares ones are pretty limited.

      Questrade is unrestricted, all ETF’s are commission free.

  8. My ROTH IRA is with TD Ameritrade, and I have been investing in Vanguard ETFs. I am currently leaning toward setting up my TD Ameritrade ETFs on DRIP, which appears to be free, for now at least, and not contribute anything further. That way I can avoid account closing fees and hassle. I am planning to open a new ROTH with Vanguard, which appears to be free if you sign up for electronic delivery of notices, statements, etc., and Vanguard ETFs trade for free. I am hoping this plan will work, but I am nervous about it. Thanks so much Wanderer and Firecracker for addressing this issue and for providing a free investment workshop.

  9. Especially Americans, can’t we just use Vanguard for free? (No buying costs, just low expense ratios)? Taxable or tax-advantaged account – you can do both.

    What am I missing here?

    1. Vanguard is the answer in America, 100%. BUT it’s unclear if they will sponsor this site as Ameritrade did, and it sounds as though they need a sponsor.

  10. Vanguard is playing a dirty game with the brokerages.
    I’m w/ Ishares on Fidelity and very happy. We don’t need Vanguard…they’re too big and playing hard with that.

    1. I don’t get the Vanguard shade you’re throwing here. Yes, they’re big. Yes, they’re forcing other brokerage houses to change the way they do business. I say screw ’em, the high cost brokerages had it coming. Similarly, TD Ameritrade earned losing the business that Millennial Revolution was sending their way.

      Early this year, I moved an account from Raymond James, with their ridiculous fees, to Vanguard. Relatively easy, Vanguard talked me through it on the phone. I have no regrets. I commented on the previous post that those looking for no fees on buying or selling Vanguard ETFs can do an in-kind trade to move to Vanguard. Here are those links again:

      https://investor.vanguard.com/account-transfer/other-questions

      https://investor.vanguard.com/etf/fees

      FireCracker & Wanderer – I know it must suck losing the affiliate income. Thank you two for doing the right thing. Unfortunately, Vanguard doesn’t have an affiliate program. You’re totally right though, the beauty of FI is that you don’t need the money. Keep fighting the good fight. The Revolution continues.

    2. You have said you don’t like Vanguard twice in comments on this post. What is your problem with them compared to other brokerages? What dirty game are they playing?

    1. I agree with the suggestion to use Schwab. They have EFTs that compare to Vanguard and even undercut Vanguard a little bit. They also have a REALLY useful checking account with no monthly fee and unlimited free ATM fee reimbursements worldwide. They also now have a dashboard that links to outside accounts, meaning that it’s a good replacement for Personal Capital too!

      1. I have both Schwab and Vanguard. Not sure why people don’t like Vanguard, especially if you can get the Admiral shares that are available for those who can invest 10K and up.

        Schwab…love Schwab even though they charge $5 a trade for anything but their own proprietary funds. That said, I like some of their proprietary funds. As Ryan said, some of their ETFs approximate Vanguards (SCHB= VTI, SCHX= VOO, for example).

        And yes, love that Investor Checking. Have never paid a fee and I use it all over the world. Love seeing the fees reimbursed at the end of the month. I did not know about the dashboard, will have to check that baby out!

    1. Probably, but hold off for now. The changes are to trade commissions, so if you stop trading after Nov 20, you’ll incur no extra fees. Until then, however, I’d suggest searching for a new broker. I know that’s what I’m gonna do…

  11. As others have said, you guys rock and we appreciate the time, research and energy you put into providing such great and free info on this site. Just two thoughts:
    1) I follow the workshop too, but with Charles Schwab. The VTI, VEU and BND funds weren’t on their commission free-list either, but I got them to allow me to trade those funds free based on a) being a long time customer, and b) telling them their competitors ( eg TDA) offered those funds free; so,
    2) perhaps its possible for you to negotiate with TDA to continue to include and keep those three funds commission free? May be worth a try.

    1. Wanderer, FIreCracker, what if you called up TD Ameritrade, tell them you have a million and one followers from your educational website and that they will all be pulling out if they don’t put back Vanguard on their commission free etf list or at least offer it free for your affiliate link?

      Doesn’t hurt to try, if it worked for Chris with Schwab, it might work for you guys.

  12. Does anyone know if the U.S. TD Ameritrade platform will allow purchasing VTSAX mutual fund via their platform fee free? I have been buying the VTI ETF, but my account is now larger than $10k so VTSAX seems like a good option?

    I have all my other investments in Vanguard and have no complaints there, I just have my HSA account with TD Ameritrade since it was the lowest cost option I could find previously. Maybe worth another look now…

  13. For my HSA, my employer uses HSA Bank, which is linked to TD Ameritrade. Contributions to the HSA are done through payroll deduction and before social security taxes. I keep the insurance deductible at HSA Bank in cash. Everything above the deductible is swept over to TDA and used to buy shares biweekly. Leaving TDA has a lot of drawbacks because of the nuances of this HSA situation.

    I’m disappointed in the loss of free Vanguard funds at TDA, but the new list does include replacement index funds with even lower fees (expense ratios):

    VTI (0.04) –> SPTM (0.03)
    BND (0.05) –> SPAB (0.04)
    VEU (0.11) –> 80% SPDW (0.05) + 20% SPEM (0.11)

    The new funds have lower trade volume, but they track the same indices.

    My plan is to
    1) Keep my HSA with TDA.
    2) Keep my current Vanguard investments on DRIP
    3) Going forward, buy SPTM/SPAB/SPDW instead of VTI/BND/VEU

    1. Thanks for writing this up! Being in the same boat, I think I’ll do exactly what you state. Kinda bummed that total assets for SPTM are barely 3/5 of a percent of VTI ($532M vs $86.8B) but it’s still worlds better than wasting away making negligible interest with HSA Bank.

    2. I’m in the same boat RE: HSA Bank. Sounds like SPTM would be a good option for me to replace VTI. Am I missing anything, or does simply buying VTSAX mutual fund shares avoid fees as well?

      Thanks in advance for any thoughts.

  14. Thank you guys for always standing up for us and being transparent at your own cost. We really appreciate you guys in the community.

    What do you think about Fidelity as a replacement?

  15. I would buy vanguard mutual funds, but perhaps it may be hard for you to open an account for demo purpose.

    if that’s the case, I also second the recommendation to go with schwab. their ETFs are low cost, frequently touted as an alternative to vanguard. you should be able to construct a easy 3 fund portfolio with schwab ETFs.

  16. Not directly related to your post, but I received this in my Qtrade monthly newsletter (I set up with Qtrade before you started your workshop and decided not to switch. It seems to be working for me…..for now).

    https://join.qtrade.ca/passive-investing-defenders-make-case-for-etfs/?utm_source=Openfield&utm_medium=email&utm_campaign=Insights

    Not sure if that link will work for you, but the gist of the article is that passive investing in ETF index funds is what’s causing the market over valuation. Here’s the first paragraph:

    As the world marks the 30th anniversary of the 1987 Black Monday crash, a new villain has appeared on the scene. There is widespread disquiet with the growth of passive indexing, which traders believe to be distorting markets.

    Would love to hear what you (or JL Collins) think of this article.

    1. That is exactly what is happening and nobody is paying attention…all these passive “investors” who are buying but are too lazy to analyze valuation (if they know what that is) are in for a big surprise soon! There will be no Godfather to save their money!

      1. Joe,

        Please elaborate on that statement. I would love to know how those who passively invest in a stock market that has never lost money over the long term (due to the fact that American businesses as a whole increase in intrinsic value over time–are going to be in for a “big surprise” due to their investing style. A big surprise that has never once materialized for these investors. I would love your insights as to the nature of this “big surprise” and what alternative investment strategies you propose.

        I and all the other followers oh this blog eagerly await your response.

        Sincerely,
        ARB–Angry Retail Banker

  17. First, kudos on putting your readers first and setting aside the affiliate income you’ll now lose. I’d expect nothing less.

    This is a great example of what I warn people about. Competitive pressure has forced other financial firms to match Vanguard. But their heart is not truly in it and putting investors first is not a core value for them as it is for Vanguard.

    They do it only as a loss leader and are always looking for ways to extract higher fees from those they lure in. Your tale is a perfect case in point.

    That said, if others want to believe their marketing pitches that works for me. Even Vanguard benefits from competitive pressure.

  18. Yikes! My HSA is stuck with TD Stabby-in-the-Back-itrade and I didn’t receive this notice, so I’m grateful that you posted it.

    Definitely some “interesting” selections in this list, masquerading as responsible S&P 500 funds: “SPHB is the S&P 500 ETF for extreme market bulls—almost akin to a leveraged fund.” Ooh, leverage! And 0.25% ER! Run away!

      1. I agree with Frank. Consider going straight to Vanguard. Their website is not designed for “traders” but designed well for “investors” if you know what I mean. Plus with brokerages that undercut Vanguard you’ll notice investors call these funds loss leaders. The brokerage can and most likely will change at any time. In my opinion you cannot go wrong going straight to Vanguard.

        1. You say traders as if it was a bad think! We make a living trading stocks man…it doesn’t mean we don’t play for the long run too…

  19. My personal broker and humble recommendation would be https://www.motifinvesting.com (affiliate link if you are interested in using them: http://r.mtf.io/JhrN9) They do not offer commission free trades but you can buy up to 30 different security instruments at one time (stocks, etfs, mutual funds, ect) for just $9.95 and you can purchase fractional shares of all security instruments as well. The lack of commission free trades are not ideal but the ability to buy fractional shares have made up for this inconvenience.

  20. Hi. I just opened an account at TDAmeritrade. I noticed whenever I TT money to Wells Fargo they deduct USD23 each time. And I was told they would only deduct USD3. I am new in all these opening account because I am from Asia. Please advise. Thanks. ( I know my Q is off from the topic)

  21. Morning everyone,

    Wanderer, there is a great article on Forbes by David John Marotta regarding TDA’s reason for dropping Vanguard. Bottom line TDA got greedy and wanted Vanguard to pay-to-play and Vanguard refused. The author is none to happy with the decision since his portfolio consisted of Vanguards etfs as well.

    Although a lot of people have complained, he said not enough to change their minds. Below is the link, hope it helps in the decision.

    https://www.forbes.com/sites/davidmarotta/2017/10/19/td-ameritrade-eliminated-low-cost-commission-free-exchange-traded-funds/#170c69837b63

  22. +1 on Interactive Brokers, $0.005 commission per share, with $1 minimum – ie for lower amount $1 per trade. Not free, but nice improvement over $6.

    Robinhood is another option (commission free), it has less history than IB though.

  23. I use both Fidelity and Schwab. Both are excellent. I actually got a full unlimited years worth of free trades from Schwab when I transfered my account. It was a little over $100k and that was part of the deal, but then after my year was up, I got this email from them saying they were extending that free trades period for another year. I couldn’t believe it, but I am mighty happy. It is competitive out there now for your dollars and you can use that to your advantage. Nothing but happy with both brokers.

  24. Well this is a real bummer. Ive got some in a self directed 401k/457 in TD ameritrade. Sadly its my only choice if I don’t want to use the crappy funds they give us in the plan. I am thinking of using SPTM and SPDW. What do you think?

  25. Sorry to see that TD Ameritrade did that to everybody. Good for you for putting your principles ahead of money and no longer promoting them anymore.

    I’m so glad I haven’t been faced with this situation. I can’t afford to lose any affiliate commissions (Commission Junction punishes me for lack of success by charging me $10/month that I don’t make a sale). Thankfully, I don’t earn all that much from my affiliate partners anyway, so ditching an affiliate probably wouldn’t make a difference anyway.

    Yay?

    Sincerely,
    ARB–Angry Retail Banker

  26. I love your blog! But I think I may read it too much….

    Last night I talked in my sleep and said, “TD Ameritrade is charging fees now.” Super juicy stuff.

    Thanks for the inspiration and information!

  27. I’m partial to Vanguard, at least for US investors. Commission free Vanguard ETF trades (or skip ETFs and go straight to the mutual fund equivalents for almost all asset classes; also commission free 🙂 ). Fidelity could work as they have a lot of commission free ETFs but some are sucky ishares (others are good ishares ETFs 🙂 ).

    Those 2 don’t offer an affiliate relationship but I still recommend them on my blog (and use both on the rare occasions I actually buy/sell something).

  28. I guess I’m curious as to why MR recommended Ameritrade at all- it’s a for-profit company, not a client-owned operation like Vanguard. As the Godfather notes above, Vanguard is the only company without an inherent conflict of interest, and is therefore committed to indexing (hell, they invented it), not simply using it as a loss-leader.

    To me the bigger question is- why Ameritrade at all? Why not Vanguard from the get-go? Remember, thousands of people may have made what turned out to be ill-advised investment decisions based on this site’s promotion of a for-profit company that is focused on earning income, not on helping its investors.

    So, why Ameritrade to begin with? Why not Vanguard? Why promote a for-profit company?

  29. Hi Wanderer, I know your on a mission to find an alternative to TDA, and everyone is recommending Vanguard and Schwab but have you heard about Robinhood?

    I just saw this article about it then in fastcompany

    https://www.fastcompany.com/40437888/how-brokerage-app-robinhood-got-millennials-to-love-the-market

    Apparently Robinhood offers commission free trades and they explain how they make money.

    This is their site: https://www.robinhood.com/

    Thought I pass it on as an alternative option.

  30. I have to say I hate Vanguard because they didn’t open my account just because I’m not American citizen. This is so frustrating and I felt really bad.
    I know you guys love Vanguard but seriously, they are an arrogant and discriminatory company. Period. I know people will dislike my comment but so be it. This is how I felt

  31. What do you guys think about Schwab’s commission free mutual fund SWPPX as an option? Or trading directly on Vanguard’s website?

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