TD Ameritrade changing commission-free ETFs

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Pet Hog
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TD Ameritrade changing commission-free ETFs

Post by Pet Hog » Wed Oct 18, 2017 2:23 am

I received an email this morning heralding the "happy" news that TDA is tripling its number of commission-free ETFs. Unfortunately for us, they are no longer going to include VTI, TLT, or SHY among them. I haven't looked close enough through the list of new free ETFs to find suitable substitutes (still no gold ETF, it seems), but thought I'd pass on the news.
We will be replacing most of the ETFs currently on the commission-free ETF list with a broad new selection of ETFs from AGFiQ QuantShares, First Trust Portfolios, iShares ETFs, J.P. Morgan Asset Management, PowerShares by Invesco, ProShares, State Street Global Advisors’ SPDR Business, and WisdomTree Investments. These new ETF choices will be available in the ETF Market Center beginning October 17, 2017.

Current ETFs will remain on the commission-free list through November 20, 2017. Beginning November 21, 2017, they will trade at our standard low commission rates.

The new list will provide access to low-cost ETFs in the same asset classes that the current ETFs provide, along with several new asset classes. If you choose to replace any current position on the commission-free list with an ETF from the new list by November 20, 2017, you will not be charged commissions for either trade.
Link to pdf of new commission-free ETFs here
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ochotona
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Re: TD Ameritrade changing commission-free ETFs

Post by ochotona » Wed Oct 18, 2017 5:19 am

I'm sure you'll find direct replacements for VTI, TLT, SHY.

SPTL can replace TLT... slightly shorter duration.
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sophie
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Re: TD Ameritrade changing commission-free ETFs

Post by sophie » Wed Oct 18, 2017 8:43 am

Ack. Thanks for letting us know!

I pulled up the list. The news is not good, as there are few commission free choices with low expense ratios. The SPDRA funds (stocks) have decent expense ratios, but I'd have to check them out in detail before switching. BIL should work for cash (1-3 month T bills), or SPTS (short government bonds).

I'll probably stick with VTI and TLT and just pay the commission fees as I only trade once a year. The cash options above are nice though.
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Kriegsspiel
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Re: TD Ameritrade changing commission-free ETFs

Post by Kriegsspiel » Wed Oct 18, 2017 10:33 am

sophie wrote:Ack. Thanks for letting us know!

I pulled up the list. The news is not good, as there are few commission free choices with low expense ratios. The SPDRA funds (stocks) have decent expense ratios, but I'd have to check them out in detail before switching. BIL should work for cash (1-3 month T bills), or SPTS (short government bonds).

I'll probably stick with VTI and TLT and just pay the commission fees as I only trade once a year. The cash options above are nice though.
Seriously, what the fuck, Ameritrade! My HSA runs it's investments through them. I do the same as you, Sophie: buy a big chunk of VT (set to DRIP) whenever I make the yearly contribution.
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Tyler
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Re: TD Ameritrade changing commission-free ETFs

Post by Tyler » Wed Oct 18, 2017 10:48 am

sophie wrote: I'll probably stick with VTI and TLT and just pay the commission fees as I only trade once a year.
Yeah, I feel like some people have been overreacting a bit. Some seem to have the impression that VTI is no longer an option at all, when in reality they're just adding a normal $7 trading fee just like the vast majority of other funds. I can see how that's a big problem if you're constantly buying small chunks, but if you simply save up and invest in larger chunks the impact is within your control. FWIW, I've been paying $8 per VTI trade at Fidelity for years and the impact of the commission on my bottom line is completely negligible for how little I trade.

That said, I do think the practice of baiting people into popular funds by waiving the commission only to reinstate the commission later is shady to say the least. In a taxable account, people are basically trapped because of the potential tax impact of switching funds. And you've gotta think there's cash being exchanged behind the scenes to drive investor money into the funds on the new commission-free list. I understand why people are upset, and I probably wouldn't stick with a broker that made a habit of that.
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ochotona
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Re: TD Ameritrade changing commission-free ETFs

Post by ochotona » Wed Oct 18, 2017 12:08 pm

Tyler wrote:
sophie wrote:In a taxable account, people are basically trapped because of the potential tax impact of switching funds. And you've gotta think there's cash being exchanged behind the scenes to drive investor money into the funds on the new commission-free list.
If the broker-to-broker transfer is in-kind and not cash, you don't have a taxable event.

Consider making your payday contributions into substantially similar no-fee choices, then selling them and moving into your preferred not-free choices every once in a while. I doubt you'd even see any kind of performance difference.
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Re: TD Ameritrade changing commission-free ETFs

Post by Xan » Wed Oct 18, 2017 12:20 pm

ochotona wrote:
Tyler wrote:
sophie wrote:In a taxable account, people are basically trapped because of the potential tax impact of switching funds. And you've gotta think there's cash being exchanged behind the scenes to drive investor money into the funds on the new commission-free list.
If the broker-to-broker transfer is in-kind and not cash, you don't have a taxable event.

Consider making your payday contributions into substantially similar no-fee choices, then selling them and moving into your preferred not-free choices every once in a while. I doubt you'd even see any kind of performance difference.
I believe Tyler is talking about the case where you want to stay with your broker, and switch between a previously-free fund to a now-to-be-free fund. Selling and buying in order to do that would definitely be taxable.
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Re: TD Ameritrade changing commission-free ETFs

Post by Tyler » Wed Oct 18, 2017 12:37 pm

Xan wrote: I believe Tyler is talking about the case where you want to stay with your broker, and switch between a previously-free fund to a now-to-be-free fund. Selling and buying in order to do that would definitely be taxable.
Yes, that's what I meant. It's true that you can avoid this by transferring shares in-kind to a new brokerage if it's really that much of a problem in your particular situation. I imagine TDA is banking on most people not being aware of that option and either sucking it up and paying the new commission or switching to a new commission-free fund while eating the tax bill on their own dime.
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Re: TD Ameritrade changing commission-free ETFs

Post by foglifter » Wed Oct 18, 2017 1:49 pm

Kriegsspiel wrote:
sophie wrote:Ack. Thanks for letting us know!

I pulled up the list. The news is not good, as there are few commission free choices with low expense ratios. The SPDRA funds (stocks) have decent expense ratios, but I'd have to check them out in detail before switching. BIL should work for cash (1-3 month T bills), or SPTS (short government bonds).

I'll probably stick with VTI and TLT and just pay the commission fees as I only trade once a year. The cash options above are nice though.
Seriously, what the fuck, Ameritrade! My HSA runs it's investments through them. I do the same as you, Sophie: buy a big chunk of VT (set to DRIP) whenever I make the yearly contribution.
My first reaction was similar. Then I calmed down and examined the list of new ETFs. It's certainly bad they dropped Vanguard, but they added quite a few SSgA ETFs with pretty low expense ratios. I have my HSA brokerage account at TDA and being a CA resident I only held Treasury bond ETFs EDV and IEI (to mimic the supposedly "bad" share-lending TLT) to avoid state tax. Turns out SPLT is a good and cheaper (0.06%) replacement for both EDV and TLT. Higher trading volume than EDV is also a plus. So I moved from EDV/IEI to SPLT. A slight gain from selling yesterday and buying today was an extra bonus.
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Re: TD Ameritrade changing commission-free ETFs

Post by Mr Vacuum » Wed Oct 18, 2017 5:36 pm

Tyler wrote:FWIW, I've been paying $8 per VTI trade at Fidelity for years and the impact of the commission on my bottom line is completely negligible for how little I trade.
Agreed at $8 but you will enjoy even more negligible $5 trades next time you rebalance.
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Re: TD Ameritrade changing commission-free ETFs

Post by farjean2 » Wed Oct 18, 2017 5:39 pm

I wonder if this is related in any way to all the emails I've been getting from Vanguard about switching my account to a brokerage account by November 3. I have no idea what that's all about because I was on vacation in Australia and Hawaii and haven't looked into it yet.
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Re: TD Ameritrade changing commission-free ETFs

Post by Kriegsspiel » Wed Oct 18, 2017 6:39 pm

foglifter wrote: I have my HSA brokerage account at TDA and being a CA resident I only held Treasury bond ETFs EDV and IEI (to mimic the supposedly "bad" share-lending TLT) to avoid state tax. Turns out SPLT is a good and cheaper (0.06%) replacement for both EDV and TLT. Higher trading volume than EDV is also a plus. So I moved from EDV/IEI to SPLT. A slight gain from selling yesterday and buying today was an extra bonus.
Why does being in California matter as to what investments you buy inside the HSA?
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Re: TD Ameritrade changing commission-free ETFs

Post by foglifter » Wed Oct 18, 2017 7:17 pm

Kriegsspiel wrote:
foglifter wrote: I have my HSA brokerage account at TDA and being a CA resident I only held Treasury bond ETFs EDV and IEI (to mimic the supposedly "bad" share-lending TLT) to avoid state tax. Turns out SPLT is a good and cheaper (0.06%) replacement for both EDV and TLT. Higher trading volume than EDV is also a plus. So I moved from EDV/IEI to SPLT. A slight gain from selling yesterday and buying today was an extra bonus.
Why does being in California matter as to what investments you buy inside the HSA?
California is one of 3 states that don't comply with the federal law regarding HSAs. Both contribution and earnings are taxed at the state level. Interest paid by Treasury bonds is exempt from state taxes.

https://www.bogleheads.org/wiki/Health_ ... on_of_HSAs
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Re: TD Ameritrade changing commission-free ETFs

Post by Tyler » Wed Oct 18, 2017 7:41 pm

Mr Vacuum wrote:
Tyler wrote:FWIW, I've been paying $8 per VTI trade at Fidelity for years and the impact of the commission on my bottom line is completely negligible for how little I trade.
Agreed at $8 but you will enjoy even more negligible $5 trades next time you rebalance.
Nice! I love it when brokerages are cutting fees so fast you can't keep up. :D
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Re: TD Ameritrade changing commission-free ETFs

Post by Mr Vacuum » Wed Oct 18, 2017 7:53 pm

Tyler wrote:
Mr Vacuum wrote:
Tyler wrote:FWIW, I've been paying $8 per VTI trade at Fidelity for years and the impact of the commission on my bottom line is completely negligible for how little I trade.
Agreed at $8 but you will enjoy even more negligible $5 trades next time you rebalance.
Nice! I love it when brokerages are cutting fees so fast you can't keep up. :D
It’s amazing how even that small fee is enough to make me think twice vs. a similar commission-free fund that may have other risks like lower volume or reliance on securities lending. But whenever that happens I just imagine a small scrunched nose dog telling me to mind the spreads and pull the trigger on the Vanguard fund.
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Re: TD Ameritrade changing commission-free ETFs

Post by Mr Vacuum » Wed Oct 18, 2017 7:54 pm

Mr Vacuum wrote:
Tyler wrote:
Mr Vacuum wrote:
Agreed at $8 but you will enjoy even more negligible $5 trades next time you rebalance.
Nice! I love it when brokerages are cutting fees so fast you can't keep up. :D
It’s amazing how even that small fee is enough to make me think twice vs. a similar commission-free fund that may have other risks like lower volume or reliance on securities lending. But whenever that happens I just imagine a small scrunched nose dog telling me to mind the spreads and I pull the trigger on the Vanguard fund.
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Re: TD Ameritrade changing commission-free ETFs

Post by Mr Vacuum » Wed Oct 18, 2017 7:55 pm

Tyler wrote:
Nice! I love it when brokerages are cutting fees so fast you can't keep up. :D
It’s amazing how even that small fee is enough to make me think twice vs. a similar commission-free fund that may have other risks like lower volume or reliance on securities lending. But whenever that happens I just imagine a small scrunched nose dog telling me to mind the spreads and I pull the trigger on the Vanguard fund.
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Re: TD Ameritrade changing commission-free ETFs

Post by eufo » Wed Oct 18, 2017 8:53 pm

For someone that normally makes many many many small purchases of commission-free ETFs each month, a $6.95 fee seems like much more of a barrier than it may seem to others that only incur a fee once every few months or longer. I liked to nibble all month as I transferred money into my accounts each week. Clearly I need to change my approach and/or my vehicles.

I kind of want to give State Street the benefit of the doubt and go with:

1) SPTL instead of TLT
2) SPLG instead of IVV
3) SPMD instead of IJH
4) SPSM instead of IJR

Commission-free plus lower ERs all around. Definitely losing liquidity and narrow spreads in the process, though.

Even if I did this, I can't just sell all my holdings in my margin account or I'd get demolished in taxes, so I'd have 2 ETFs for each asset class which is giving my OCD a headache already.

My other very real option is to keep my holdings and just be more "hands off" and wait for larger rebalancing opportunities to minimize the impact of commissions.

How are other TDA clients here going to approach this in your taxable and non-taxable accounts?
Don't agree with me too strongly or I'm going to change my mind
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Re: TD Ameritrade changing commission-free ETFs

Post by eufo » Wed Oct 18, 2017 9:11 pm

Actually, after taking a look at the overlap in these State Street funds, I don't like the looks of them... Here's the MidCap (SPMD) vs. SmallCap (SPSM)... 737 overlapping constituents... 74% of the ones in SPMD also reside in SPSM!

https://www.etfresearchcenter.com/tools ... MD&f2=spsm
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Re: TD Ameritrade changing commission-free ETFs

Post by Kriegsspiel » Thu Oct 19, 2017 9:11 am

foglifter wrote:
Kriegsspiel wrote:
foglifter wrote: I have my HSA brokerage account at TDA and being a CA resident I only held Treasury bond ETFs EDV and IEI (to mimic the supposedly "bad" share-lending TLT) to avoid state tax. Turns out SPLT is a good and cheaper (0.06%) replacement for both EDV and TLT. Higher trading volume than EDV is also a plus. So I moved from EDV/IEI to SPLT. A slight gain from selling yesterday and buying today was an extra bonus.
Why does being in California matter as to what investments you buy inside the HSA?
California is one of 3 states that don't comply with the federal law regarding HSAs. Both contribution and earnings are taxed at the state level. Interest paid by Treasury bonds is exempt from state taxes.

https://www.bogleheads.org/wiki/Health_ ... on_of_HSAs
Ok I did see something about that. Do they tax div/int/capital gains annually, or only when you make a withdrawal?
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Re: TD Ameritrade changing commission-free ETFs

Post by foglifter » Thu Oct 19, 2017 12:10 pm

Kriegsspiel wrote:
foglifter wrote:
Kriegsspiel wrote:
Why does being in California matter as to what investments you buy inside the HSA?
California is one of 3 states that don't comply with the federal law regarding HSAs. Both contribution and earnings are taxed at the state level. Interest paid by Treasury bonds is exempt from state taxes.

https://www.bogleheads.org/wiki/Health_ ... on_of_HSAs
Ok I did see something about that. Do they tax div/int/capital gains annually, or only when you make a withdrawal?
It's actually a gray area to me: both the core account holder (HSA Bank) and the brokerage account provider (TD Ameritrade) apparently treat the HSA as a pretax account. So they don't track tax lots and don't send any 1099Bs as with a regular brokerage account. And the CA state tax form simply asks for a single number - "interest earned in HSA". For now I report the interest earned in the core account (whole $10 :) ). I'm not selling anything so I don't have any capital gains in the investment account. And the interest/dividends from Treasuries aren't taxable.

Of course if I end up living in a different state in retirement the problem will go away. ;D
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Re: TD Ameritrade changing commission-free ETFs

Post by ochotona » Thu Oct 19, 2017 4:54 pm

Advisers are reportedly pissed off to the max with the changes.
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Re: TD Ameritrade changing commission-free ETFs

Post by eufo » Sat Oct 21, 2017 8:59 am

After some serious thought, I'm sticking with TD Ameritrade and my iShares ETFs for now in both my taxable and non-taxable accounts, despite the loss of being commission-free. They're solid funds and that's worth a lot to me. If the new State Street funds can gather some serious support, I may entertain them at a later date.
Don't agree with me too strongly or I'm going to change my mind
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Re: TD Ameritrade changing commission-free ETFs

Post by rocketdog » Thu Dec 07, 2017 12:54 pm

My wife's HSA is at TDAmeritrade as well so here are the changes I made (I hate paying commissions if I can avoid them):

Gold = IAU (unchanged, and not commission free, but no commission-free options exist).
Long-term Treasuries = SPTL
Stocks = SPTM
Cash = None (I don't believe in holding cash until I start withdrawing from the portfolio).

Instead of cash, I split that amount between SLYV (small cap value) and USRT (real estate). Both are good diversifiers. I might also consider adding SPEM (emerging markets) for further diversification as it is doing well these days.
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