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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.
Just wanted to provide an update as to what’s going on. Last week, we decided to transfer our workshop portfolios from TD Ameritrade to Vanguard because of the recent changes they’ve made to their fee schedule. Basically, they removed the low-cost Index ETFs we were using to invest from their commission-free ETF list, meaning that the sweet sweet zero-cost investing we’ve been doing is going away.
Note: After an outcry from not just us but EVERYONE, TD Ameritrade is delaying the implementation of the new fee schedule until January 19, 2018. So at least we have some time.
So basically, we’re transferring. Specifically, we’re going to do what’s known as an in-kind transfer so that we don’t have to sell any ETF units and possibly incur a taxable event. Only problem is, TD Ameritrade charges a fee for doing in-kind transfers out their account. Ugh, more fees! I’m starting to notice a trend here…
I Ain’t Paying No Stinkin’ Fees!
So here’s what we’re trying to do: You may have noticed up there that while a FULL account transfer costs $75, a PARTIAL account transfer is free. So it should be possible to get everything out of the account for free without incurring capital gains by exploiting.
First, recall that in our trading accounts, there’s obviously all our ETFs in there, but also a small amount of cash, either leftover from our buys or in income/dividends that are paid out over time.
So what we want to do is first, do a partial account transfer of all the ETF units, but leave the spare cash in the TDA account…
Because this isn’t transferring EVERYTHING out, we shouldn’t get charged that $75 fee. Then, we transfer out the cash into a regular checking account using an electronic fund transfer, called ACH or Automated Clearing House transfer. These should be free to/from our TD Ameritrade account.
Then, we do one more free ACH transfer of that cash into our Vanguard account.
And finally, we close down the empty TD Ameritrade account.
Now, I’m currently working with reader Alex, who has graciously offered to test this out. If it works and everything goes through without any fees charged, I’ll let everyone know and post a step-by-step guide on how exactly to do this. So this is what we’re trying to do, but don’t do it yet because we want to test it out first.
Stupid TD Ameritrade
Amusingly, the irritation at this change has not been limited to this blog. People have been bitching about it all over the place. Check it:
— The Motley Fool
— Wealth Management.com
And further investigation by these outlets has revealed that TD Ameritrade basically told companies like Vanguard, iShares and others to pay up, or they’d be taken off the commission-free list. And Vanguard, in classic Vanguard fashion, refused their shakedown efforts believing that doing so would increase their ETF expenses, thereby destroying the very reason we use and love them.
Vanguard made a bet that investors would reward them by sticking with their funds in a different brokerage. TD Ameritrade made a bet that by exploiting people’s laziness they could monetize their commission-free ETF list. Time will tell who was right, but on our part we’re definitely going with Option #1.
Anyway, that’s it for today. We’ll keep pushing our transfer efforts through and once we know it works we will be sure to let everyone know with a step-by-step guide right here on Millennial-Revolution.com.
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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.