TD Ameritrade Commission-Free ETF List – Changes Effective November 2017

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Updated. As of October 2017, TD Ameritrade notified their clients of the following changes to their commission-free ETF trading program. Here are the highlights from the e-mail:

  • Here is the old ETF list [pdf]. Through 11/20/17, they trade commission-free. Starting 11/21/2017, they will trade at standard commission rates ($6.95 online trades).
  • Here is the new ETF list [pdf]. These 296 ETFs can be traded commission-free immediately (as of 10/17/17).
  • ETFs held less than 30 days will be charged a short-term trading fee of $13.90, down from $19.99. This new fee will go into effect on November 21, 2017.
  • All new ETFs on the commission-free list cannot be used as collateral for a margin loan, nor can they be included in margin equity for 30 days after purchase.

What ETFs are being removed? Initially started in 2010, the “old” list of 100 ETFs was based on advice from Morningstar as to which 100 ETFs that would be most useful for long-term investors to build a ETF portfolio. In other words, these were popular buy-and-old ETFs for “Average Joe/Jane” customers. These ETFs were from the biggest providers (Vanguard and iShares) and had the highest assets, highest trading volume, and lowest expense ratios.

There are now zero ETFs from Vanguard. The most widely-held iShares ETF are also missing. Here are some notable removals:

  • Vanguard Total Stock Market ETF (VTI)
  • Vanguard FTSE All-World ex-US ETF (VEU)
  • Vanguard MSCI Emerging Markets ETF (VWO)
  • Vanguard REIT Index ETF (VNQ)
  • Vanguard Total Bond Market ETF (BND)
  • iShares Core S&P 500 (IVV)
  • iShares Core US Aggregate Bond (AGG)
  • iShares TIPS Bond (TIP)
  • iShares 1-3 Year Treasury Bond (SHY)
  • iShares 20+ Year Treasury Bond Fund (TLT)

Note: TD Ameritrade will still provide free dividend reinvestment on your existing ETF positions.

What ETFs are being added? The “new” list of 296 ETFs are mostly niche ETFs. Providers include AGFiQ QuantShares, First Trust Portfolios, iShares ETFs, J.P. Morgan Asset Management, PowerShares by Invesco, ProShares, State Street Global Advisors’ SPDR, and WisdomTree Investments. They cover a wide range of specific investment themes.

Unfortunately, this move also puts TD Ameritrade more firmly into the pack of brokerage with ETF/mutual fund “supermarkets” based on who will pay them for shelf placement:

TD Ameritrade receives remuneration from certain ETFs (exchange-traded funds) that participate in the commission-free ETF program for shareholder, administrative and/or other services, generally ranging from the equivalent of approximately 15% to 30% of the ETFs’ annual net operating expense ratio.

This is a common arrangement and you’ll see the same thing at Schwab and Fidelity, but in my opinion you end up a bigger list of less-attractive products. They also tend to have higher expense ratios. I’ve never even heard of these before:

  • First Trust Alternative Absolute Return Strategy ETF
  • iShares Fallen Angels USD Bond ETF
  • PowerShares Optimum Yield Diversified Commodity Strategy No K-1 Portfolio
  • QuantShares US Market Neutral Anti-Beta Fund

To be fair, there are still some iShares Core ETFs (though not the broadest ones) and some SPDR ETFs that cover broad indexes (though with lower asset size and trading volume). There are maybe 15-20 ETFs that I could see as part of a low-cost, long-term portfolio. A few examples:

  • SPDR Dow Jones Total Market (SPTM)
  • SPDR S&P World ex-US (SPDW)
  • SPDR Lehman Aggregate Bond (SPAB)
  • iShares 0-5 Year TIPS Bond ETF (STIP)
  • iShares Core International Aggregate Bond ETF (IAGG)
  • iShares Core U.S. REIT ETF (USRT)
  • iShares Global REIT ETF (REET)

Here are two ETFs on the list that I have bought myself in the past:

  • WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)
  • WisdomTree U.S. SmallCap Dividend Fund (DES)

Mostly, I just don’t like the fact that they changed it after many years. You might have built up a position with $0 trades, and now it costs $6.95 to buy more. You can try and switch to the closest approximate ETF, but what about next time they shake up the list? TD Ameritrade won “#1 for Long-Term Investing” in the Barron’s magazine 2017 rankings. I don’t know if long-term investors like to switch holdings every 7 years. Maybe the niche ETFs are a better draw for TDA’s target audience.

If you want to construct a low-cost, broadly-indexed ETF portfolio, I would compare with the offerings from Schwab, Vanguard, and Fidelity. None of those are an independent brokerage like TD Ameritrade, but they do offer commission-free trades on low-cost, broad ETFs. You could also look into the free trade offers from Bank of America ($50k+ in relationship assets) and Robinhood (trades done via app only).

Current New Account Promotions. TD Ameritrade will let you trade commission-free for 60 days + get up to $600 if you open a new individual, joint, or IRA account. The specific bonus depends on how much money you move over. Note that unlike some other offers, this one includes IRAs and thus rollover IRAs from 401k plans.

Bottom line. TD Ameritrade has shifted the nature of their commission-free ETF program. Overall, the widely-held, broad ETFs from Vanguard and iShares have been removed. In their place, many niche/sector ETFs and smaller, newer ETFs have been added. If you like specialized ETFs, check to see if it is on their newly-expanded list of 296 ETFs.

Comments

  1. The new list is 90% garbage. They are mostly low volume and hard to trade oddballs. I’ve tried niche ETFs in the past and won’t do it again. Some of my ETFs even got dissolved and I ended up with cash to reinvest. High volume = health and liquidity of the ETF.

    The conspicuous avoidance of mainstream ETFs means they want the marketing bullet “free” but to make more money on trades. It’s unfortunate as my Scottrade accounts are being rolled over to TD Ameritrade — I thought it was a good company.

    Wait and see. Sticking with Vanguard for now…

    • aaron shaefer says:

      I found out the bid ask spread on these new thinly traded etf’s are far wider with the old Vanguard etf’s. I bought SPYV this morning. SPYV was an 18 cent bid/ask spread this morning, when ends up being an extra 0.14%. I am thinking I am far better by paying the $25 commissions to goto mutual funds instead.

  2. I think that you may like the following low cost ETFs

    SPTM – US Total stock market, mer of 0.03%
    SPDW – World Ex US with Mer of 0.04%

  3. This is certainly sad news that TD removed Vanguard ETFs.

  4. This is why I check this blog every day. I had not seen this information. Looks like a mistake to me. Vanguard is the only reason to use Ameritrade. Or it was my only reason. Without the free Vanguard accounts, Schwab and Fidelity are much better options.

  5. I first moved all of my investments (403b, 457, traditional IRA, Roth IRA, and brokerage accounts) to TD Ameritrade in May 2012 when I found out that they offered T Rowe Price mutual funds and many Vanguard ETFs commission free. Now, just a little over 5 years have passed, and they have changed the rules in the middle of the game, so to speak. So much for long-term investing and counting on one’s new brokerage house to at least keep policies concerning transaction fees in place, if not enhance them, but certainly not retract them. I would have hoped that TD Ameritrade might have at least considered grandfathering customers who had bought into the old list of 100 commission-free ETFs and allowed them to continue to sell any of these funds commission-free even beyond November 21, 2017. I, for one, find it very difficult to find a good equivalent ETF on their new list to match VYM. As Jonathan has said, the “old” list of 100 ETFs were the most useful for long-term investors to build an ETF portfolio. The “new” list of 296 ETFs are mostly niche ETFs. TD Ameritrade now touts 296 no-fee ETFs versus 100 from before, but let’s not forget about what’s most important…quantity or quality?

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