TD Ameritrade triples time before it charges fees on popular ETFs

Extending free trading of Vanguard and iShare ETFs to January

Oct 23, 2017 @ 7:00 pm

By Jeff Benjamin

Responding to feedback from financial advisers upset about the removal of some popular ETFs from its no-transaction-fee platform, TD Ameritrade is tripling the amount of time it will allow advisers to continue trading Vanguard and iShares Core ETFs for free.

"We heard from advisers that 30 days was not enough time, and we are extending that to 90 days, to Jan. 19, 2018," said Tom Nally, president of TD Ameritrade Institutional.

The decision comes one week after TD announced that the Vanguard and iShares Core ETFs would no longer be available without a transaction fee, beginning Nov. 20.

The original announcement, which accompanied news that the TD platform is nearly tripling the number of ETFs to 296, did not sit well with some financial advisers.

Michael Kitces, partner and director of research at Pinnacle Advisory Group and co-founder of the XY Planning Network, has spent much of the past week complaining about the changes.

(More:In the ETF world, spoils still go to the biggest and cheapest)

In a lengthy blog, with an embedded video, he said suddenly charging fees to trade the ETFs would be particularly hard on younger investors who are regularly making smaller investments.

In an online exchange, he challenged the "TDA public line that 'advisers are happy with these changes.'"

"The news is that there is actually a real negative backlash against TDA on this, especially from next-generation advisers and firms serving next-generation clients that they've been claiming to support," Mr. Kitces wrote.

Mr. Nally disagreed that all the feedback has been negative, but he acknowledged that the feedback led to the decision to extend for a full 90 days the period for continuing to trade the Vanguard and iShares ETFs for free.

"We've been listening to advisers throughout last week," he said. "Michael is just one voice. We like feedback on both sides."

Mr. Nally added that critics of the changes are overlooking the advantages of the State Street SPDR ETFs that have been added to the NTF platform.

"These are the lowest-cost broad-index-tracking ETFs," he said. "The domestic funds are 18% cheaper than Vanguard's and on the international front, they are 33% cheaper than Vanguard, which we think will be attractive to advisers and their clients."

(More: Favorite fund companies of fee-based advisers)

Much of Mr. Kitces' issue with the changes was the challenge of rebuilding and rebalancing existing portfolios with new funds.

In Mr. Kitces' blog post, which fueled 34 comments, he proposed a number of options for TD to consider in order to satisfy those advisers still wanting to trade the Vanguard and iShares ETFs without a transaction fee.

They included leaving the affected funds on the NTF platform and still adding all the new ETFs, grandfathering advisers already trading NTF funds, or introducing a low-fee wrap account.

While none of Mr. Kitces' vocal requests were met, and he said he still has not heard directly from TD, he does believe the 90-day period "is a big help."

"That allows more time for new funds to expand volume and narrow bid/ask spreads," he said. "And it lets advisers decide whether to transition to new funds in 2017 or 2018 to spread out tax consequences. This is a dramatic improvement."

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