Investment Workshop 50: Goodbye TD Ameritrade, Hello Vanguard!

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 everyone! Wow, we are quickly coming up to the end of our 1-year Investment Workshop experiment. My, how time flies. Today we’ll be doing not just one but two big things: Our last buy of the year AND…completely switching over our brokerage account! Nothing too major.

For those who don’t know, we’ve been using TD Ameritrade as our American trading platform because of their fairly extensive list of commission-free ETFs. We liked this setup since it allowed us to trade the low-cost Vanguard ETFs we were using to build our investment portfolio for free, plus it would give us the option of switching to other ETFs later if we so chose.

Well, long story short, a few weeks ago they screwed us over by changing their commission-free ETF list. Vanguard (and in fact ANY low-cost index ETFs) were removed from that list, meaning that transactions now cost $6.95 per trade! And what did they replace those low-cost index ETFs with? High-fee actively traded funds which I’ve written about over and over again which are designed to silently steal your money away while giving you statistically WORSE performance!

Now, I’m no detective here, but if I were to guess, I’d venture to say that they were hoping to use the lure of commission-free trading to steer their customers into worse-performing high-cost ETFs. Crap like this happens all the time in the finance industry, unfortunately. Companies are constantly tempted to put their own interests ahead of their clients and hoping that nobody will notice and call them out on it.

Well, we noticed. And we’re calling them out on it. And that’s why we no longer recommend TD Ameritrade to readers of the Millennial-Revolution.com.

So what do we do instead?

Well, you’ve all sent me lots of good suggestions, and I’ve been spending a few weeks reviewing them all and figuring out which one would be the best for all you guys/gals. Here’s the criteria I used to evaluate all of them.

$0 Per-Trade Commissions

This is important to anyone in the accumulation phase of their portfolio. Because you’ll typically be making a lot of small transactions every month, you really REALLY don’t want to be charged a per-trade commission each time. Even something as small as $6.95 can really add up, since trading for $6.95 x 3 ETFs x 2 times a month = $41.70 in trading fees! On our investment schedule of $1000 added to the portfolio a month, 4.17% gets eaten up immediately by fees! Try making an investment gain with THAT ball and chain dragging you down!

So $0 trade commissions were extremely important for us.

$0 Monthly Account Fees

Ugh. Nothing irritates me more than paying someone just to store MY money for me. That is MY money, motherfucker. You don’t get to have any.

Able to Handle 401(k)/Roth IRA/etc Accounts

While the Investment Workshop only covers investing in an individual account, many of our readers have retirement accounts as well, so the broker should be able to handle these.

And The Winner Is…

Well, to be honest, Condition #1 knocked out most of the big brokerages I looked at like Fidelity, eTrade, etc). This matches up with the last time I did this analysis a year ago. Back then, only 3 companies made the cut: Vanguard, TD Ameritrade, and relative newcomer RobinHood. Now, TD Ameritrade is out, leaving only Vanguard and RobinHood.

Condition #2 (no monthly account fees) actually almost knocked out Vanguard, since Vanguard charges a $20 account maintenance fee for balances under $10, 000. However, in a last-minute save by Vanguard, you can get around this fee by signing up for e-delivery of your statements.

And finally Condition #3: Support for 401(k)/Roth IRA/etc accounts. Unfortunately here’s where RobinHood falls short. Yes it has $0 trading, and yes it has no maintenance fees, but as of right now it only supports taxable investment accounts. I think they’re just too new.

So that leaves us with the winner: Vanguard!

One Last Trade…

The TD Ameritrade change officially takes effect on November 20, so for today it’s still fine to do one last buy in that account. But after that, STOP TRADING because after that every trade will cost you money and we don’t want that.

After that, we’re going to want to transfer all our assets over to Vanguard. So first, let’s do our last buy for the workshop, and after that, let’s talk about how to initiate that transfer.

Canadian Portfolio

For our Canadian portfolio, we start by putting our ETFs into the Rebalancer

This is what our current portfolio looks like…

This is what we want it to look like…

And this is how far each asset is from target…

So in order to rebalance, we need to do this…

Asset Action Units Cost/Proceeds
Cash SELL 505 $-505.00
VAB BUY 6 $152.04
VCN BUY 3 $96.81
VUN BUY 3 $137.40
XEF BUY 3 $90.84
XEC BUY 1 $27.50

And after rebalancing, our portfolio will look like this…

Asset Units Price Market Value Allocation
Cash 8 1 $8.00 0.1%
VAB 196 25.34 $4966.64 39.9%
VCN 77 32.27 $2484.79 20.0%
VUN 55 45.8 $2519.00 20.2%
XEF 65 30.28 $1968.20 15.8%
XEC 18 27.5 $495.00 4.0%

American Portfolio

And on the American side, we start by putting our portfolio into the Rebalancer

This is what our current portfolio allocation looks like…

And this is what we want it to look like…

So in order to rebalance, we need to do the following…

Asset Action Units Cost/Proceeds
Cash SELL 487 $-487.00
BND BUY 4 $326.12
VTI BUY 0 $0.00
VEU BUY 3 $160.08

And after we do that, this is what our portfolio will look like…

Asset Units Price Market Value Allocation
Cash 33 1 $33.00 0.3%
BND 63 81.53 $5136.39 40.6%
VTI 28 132.37 $3706.36 29.3%
VEU 71 53.36 $3788.56 29.9%

So Now On To Transferring…

Here’s the thing: Vanguard costs nothing to transfer a portfolio (as is their style), but TD Ameritrade does. Specifically a full-account transfer costs $75. I don’t like that. Neither should you.

That being said, I think I have a way to exploit a loophole to transfer every dollar out of that portfolio for free.

So here’s where I need help. I need an American reader with a TD Ameritrade account to work with me over the next few weeks to test out my transfer flow. If I screw up and you end up getting charged a single cent, I will reimburse you any fees you get dinged for myself. And once I have a flow that I know works for sure, we will write about it right here in the Investment Workshop with pretty screenshots and shit.

So let’s hear it. Anyone willing to help out? Shout out in the comments!

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) Vanguard
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 investorโ€™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.

50 thoughts on “Investment Workshop 50: Goodbye TD Ameritrade, Hello Vanguard!”

  1. My TD Ameritrade account only has Health Savings Account dollars in it, so I can’t be of much use to your loophole exploit discovery… but I did want to mention that TDA sent an email two weeks ago extending their implementation date:

    “Dear Valued Client,

    Last week, you received an email about the upcoming launch of our new commission-free ETF Market Center. Since then, we’ve learned investors could use more time to evaluate the new fund line-up. So we’re extending the effective date to January 19, 2018, giving you 90 days to review the funds and make any changes.”

    1. Interesting, i didn’t get an email either from TDA. I had inquired about the date and received a response from TDA on 11/7/17 stating:

      “While Vanguard ETF’s will no longer be offered in the program, there will be a transition period of 35 days, from October 17 to November 20, during which the legacy 100 ETF’s offered will be available commission free. “

    2. I’m in the same boat (self directed via HSA Bank) and not sure what funds to switch to come next year…

      What’s your game plan?

      1. I’ve set up a calendar reminder for January 18 to make my last VTI trade, set dividends to reinvest, and swap over to SPTM. Someone on some forum somewhere suggested it as a relatively direct replacement, and it looked good to me.

    1. We’ll do a wrap up of this 1 year experiment and then archive the Workshop. Then we’ll have to figure out what fun experiment to do in 2018. I’ll let you know what we decide ๐Ÿ™‚

  2. I volunteer to be the sacrificial lamb! You can email me at mia(at)dimesanddollars.com if you need someone with an American TD Ameritrade account to experiment with. My account is a Roth IRA though, so I’m not sure if that matters.

  3. I just drilled down into the TD Ameritrade free ETF list, and they have a few ETFs that would be okay:

    SPTM (rough equivalent to VTI, 0.03% expense ratio)
    SPDW (rough equivalent to VEU, 0.04% expense ratio)
    SPAB (rough equivalent to BND, 0.04% expense ratio)

    1. Hmm don’t know too much about those ETFs but I might do a write up on these in a future post. What irritates me about this move is that if everyone were to switch ETFs, it would trigger capital gains while switching brokerages wouldn’t.

        1. On further thought, for anybody with taxable accounts, the best course of action would probably be to not sell any vanguard ETF shares, and just buy SPTM, SPDW, and SPAB shares going forward. They would still get hit when they eventually sell those shares with the fee, but that would probably be the least bad of all options. It would also mess up rebalancing if they’re not selling those Vanguard shares, but hopefully not by much.

  4. Excellent workshop post again. I’m not quite there in terms of fully participating, but I’ve been following along. I’m digging the pie charts you’ve included, but can you also show the percentages of each ETF? I liked seeing the numbers in the chart pre/post rebalancing. It’s hard to discern these percentage changes in the a pie chart/graph.

    Can’t wait to read the 1 yr summary post of the work shop. I’m sure it will be enlightening ๐Ÿ™‚

  5. I volunteer to be your guinea pig.

    I have never used Vanguard before…currently with TD Ameritrade and have a regular investment account.

    I also have funds at Scottrade, which has been acquired by TD Ameritrade, of course. ๐Ÿ™

  6. Sorry cant help, i made the move to Vanguard just this year from USAA and i ended consolidated the whole shabang. I love it. good luck with your transfer, I do know that transferring to Vanguard was the most involved process ever. I wrote to them letting them know their onboarding process is convoluted but over all i guess the long term benefits still won me over.

  7. FC – Vanguard doesn’t do affiliate links does it? I ask out of shear curiosity (I’ve got trading account I’m happy with and don’t blog). I only ask b/c TD’s link was beneficial to you guys. You’re refusal to play along with TD’s blatant money grab is yet another reason I am endeared to this site. There’s nothing wrong with affiliate income, I am just curious if Vanguard participates b/c I would think that if it did it’d be the hands down winner and promoted on every FI blog (like Jim Collins [my personal investment hero]has been doing for years) with links.

    1. They don’t have an affiliate program, no. Which is unfortunate because this does take a chunk out of our blog’s income, but I don’t care. We will look out for you guys over our own bottom line.

  8. Yes, the Vanguard website can provide you with commission free ETFs including the three that you are using for your workshop.

    However, IMO, this broker scores low for any other purpose due to the lack of a proper trading platform with all the bells & whistles. They have steep minimums, commissions of $2 – $20 and a $20 account fee. You would be surprised how many people prefer paper statements and materials and will incur that fee regardless of how simple it is to click a box. I administer employer pension plans and even with explicit instructions and notifications, account fees continue to be incurred.

    Yes to Vanguard for this workshop but I would not recommend them for any other purpose.

    SJF

  9. Hi Wanderer,

    Thanks for all that you and FC do, it is really appreciated. Love the post and reader cases (spirit animals? loved it!).

    Just like Dimes & Dollars, and Jonathan above, i volunteer as well!

    Robert

  10. Hey Wanderer, can a Canadian with a US account open up the vanguard account?

    If thats not possible, do you think it’s a good idea to directly send US dollars into questrade and buy the US ETFs? I have more US dollars than Canadian lol

    1. No, a Canadian resident can’t open up a Vanguard account. So I’ve been doing exactly what you’re suggesting: Sending USD into my Questrade account and buying the US listed ETFs.

  11. Thanks Wanderer! Looks like you’ve got your volunteers all lined up so looking forward to your results.

    My question with Vanguard has to do with the Traditional IRA to Roth conversion. I make too much money to deposit into a Roth so I have to deposit into a traditional IRA and then do an immediate conversion to my Roth to get funds in there. Do you know if we can still do this with Vanguard?

    Cheers

  12. Hi Wanderer, I have a similar question as above regarding whether Vanguard supports Canadian accounts (eg. RRSP, TSFA)? Do we need an account with an American bank to transfer money into the account? Thanks!

  13. Hi Wanderer,
    Does this mean that anyone leaving outside of the US and with a US bank account can open a Vanguard account like this one? Or you’re able to do it because you’re Canadian?

    1. You have to be living in the US. I’m not actually able to open a Vanguard account myself for exactly that reason, that’s why I asked for volunteers to help test out the transfer flow.

  14. Great blog!
    Any recommendations for a Canadian on choosing international ETFs?

    My brokerage account (scotia) charges $10/trade

    Let’s say i have a choice between 2 etfs that track global stock markets
    a vanguard canadian one with a mer of .27
    a vanguard us one trading on us exchange with mer of .11

    Is it better to buy the US one? when i buy and eventually sell i am sure i will get hit by some kind of currency exchange fee of say .25% or .5% (each way)

    Is there a strategy/rule for these situations?
    eg after 3 years you are better if you bought the us version but if you only hold for 2 years you should have went canadian… something like this?
    Thanks

  15. Somehow I knew Vanguard was going to rise to the top… Maybe it was all that time reading JLCollinsNH.

    Nicely done, Wanderer & FC! This is a real service to your readers.

  16. Interesting on the TD vs Vanguard dilemma – a few questions – would TD still be worth it for single stocks like Alibaba and Sogou …. Amazon etc … ? 2nd Question – can you transfer funds from an Asia bank (where I am based) and set up an account with TD for stocks and Vanguard for Index funds? …. any drawbacks if that is possible? … beyond capital gain taxes …. you can check out my site at the above link … based on C Professionals Overseas … new homeschooling blog there …. anyway … Thanks – CPO, From the Far Side of the Planet ๐Ÿ™‚

    1. We recommend index investing over trading individual stocks. However, if you want to use 5% or less of your portfolio to speculate and you are aware of the risks, then you could do that, but we don’t buy individual stocks in TD so not sure what to tell you there.

      As for transferring funds from your Asia bank, check with your bank and ask if they charge a fee.

      1. There is no problem with speculation and that makes things interesting if you know what you’re doing.
        Vanguard treats non Americans like shit so don’t recommend them at all. Fidelity all the way or interactive brokers for foreigners.

      2. Hi M-R, yes that was the range I was thinking of less than 5% or $100,000 …… I have some connection to Hong Kong too which has been good … long term index funds is the way to go … but perhaps I am a bit batty seeing I like some of the B.A.T. and connected stocks … thanks Michael CPO

  17. Hi! Iโ€™d be willing to be your guinea pig. Iโ€™ve been following your workshop all year and been dumping all my savings into TD Ameritrade but obviously not need to make the transfer.

  18. Hi, anyone knows why Charles Schwab was discarded? It looks like it complies with the 3 point criteria you guys used to evaluate and their ETF’s have a lower expense ratio than Vanguard!
    They also have the 3 ETF’s that mimic Vanguard’s behavior and they ARE included in their ETF No Commission Fee to trade them.
    Unless I’m missing something here…
    Thanks

  19. Sucks ASS to hear about Ameritrade doing this! Props to you guys for choosing your readers and blowing the whistle on them.

    I have been gathering up my coins in anticipation of starting your workshop from step one in the January/February time-frame. (YAY!) For the most part, will the process still look the same in Vanguard as it is written in the workshop for Ameritrade? ETF symbols, allocations, rebalancing, and all those other big investment words I am not too familiar with…

    I am going to try and make your workshop line up apples to apples with beginning at Vanguard instead of Ameritrade, but if there is one or two big ticket differences to watch out for, I would greatly appreciate the head’s up!

    Thanks a million!

  20. Hi Wanderer,

    Any updates on what TD Ameritrade folks should do to move money into Vanguard before the January deadline?

    Thank you!

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