TD Ameritrade weighs charging fund companies on its commission-free ETF platform

TD Ameritrade Inc. is weighing major changes to its commission-free ETF platform, including the possibility of levying fees on asset managers, an executive for the investment platform said Friday. Matthew Judge, director of wealth management solutions for TD Ameritrade Institutional, also said the firm was reevaluating the role of Morningstar Inc. in the program. Currently, Morningstar selects the funds and managers that TD Ameritrade makes available without transaction fees. “Everything is on the table,” Mr. Judge said. “We're at an inflection point.” Mr. Judge said TD Ameritrade is reconsidering the structure of its commission-free program despite its current success and the firm's strong relationships with corporate partners, including Morningstar, and most of the largest managers of exchange-traded funds. He said the firm has made no final decisions about whether it will make any changes to the program. “We're happy with the current program,” he said. “It's been profitable for us.” But he said there were long-term concerns about the sustainability of the program in the future as advisers want more funds added to the platform. TD Ameritrade has 101 funds on its platform currently. The firm serves about 5,000 independent financial advisers as an asset custodian and investing platform. Mr. Judge spoke with InvestmentNews on the sidelines of ETF Boot Camp, a conference in New York organized by the industry website ETF Trends. TD Ameritrade's competitors, including Charles Schwab & Co. and Fidelity Investments, have organized their commission-free programs very differently. They generally collect fees from fund managers in exchange for their participation. Many fund companies report winning greater assets from advisers and other investors after joining the no-transaction-fee platforms. “It's got to be a win for everybody,” Mr. Judge said on a panel at the conference. But some fund managers may be reluctant to join the program. The Vanguard Group Inc., a TD Ameritrade partner, has long resisted paying brokerage firms that distribute its products. “What I can say is that Vanguard does not pay for distribution, that is, we do not pay platforms or advisors to sell our mutual funds or ETFs,” said David Hoffman, a spokesman for Vanguard, in an email. Mr. Judge said it was too early to say whether any potential changes could create tension if the firm accepts payments from some participating fund managers but not others. He said ETF sponsors have also requested more data on which advisers are using its funds and how. But sharing more data could present privacy concerns for advisers, he said.