One week after announcing a new commission-free ETF trading platform and drawing the ire of industry watcher Michael Kitces and others, TD Ameritrade says it is lengthening the transition time for advisors and clients to the program.
The new commission-free platform includes ETFs from eight fund providers, such as iShares, ProShares, State Street, PowerShares and WisdomTree. However, it excludes many Vanguard ETFs and nine iShares Core ETFs, which most RIAs working with the TD Ameritrade platform use in client portfolios, according to Kitces, partner and director of research at Pinnacle Advisory Group.
The $6.95 fee imposed on these popular products was going to start Nov. 20. However, Kitces, some RIAs and other industry players raised concern about these changes — along with the need for advisors to have enough time to speak with clients and decide how they may want to adjust portfolios in response to TD Ameritrade’s new platform.
In response, TD Ameritrade says advisors and investors can trade commission-free ETFs on the older platform — including the Vanguard and iShares Core ETFs — through Jan. 19, 2018.
“A 30-day transition period is not long enough for the appropriate analysis and changes,” said Tom Nally, president of TD Ameritrade Institutional, in an interview with ThinkAdvisor on Monday.
Before the platform was introduced last week, executives and others at TD Ameritrade spoke “with hundreds, if not thousands” of advisors to get feedback, which it documented. It did the same after publicly launching the new platform.
“It was a miss on our part,” Nally explained about the 30-day timeframe. “Maybe we were not thinking things through around the analysis [done by advisors] … It’s good to have open dialogue with clients, so we can make adjustments as needed.”
The new commission-free platform is now available to TD Ameritrade’s 5,000 RIA clients as well as retail investors.
“We listened [to feedback] over the past week and made the decision to extend the transition period from 30 to 90 days,” Nally explained. “Investors and advisors can trade the new funds on a commission-free basis immediately and can trade the legacy funds commission free through Jan. 19, 2018.”
According to Kitces, “the removal of all Vanguard ETFs and the most popular iShares Core ETFs has put advisors in the lurch, leaving them barely 30 days to make changes for their clients before ticket charges will apply. [This] means what was a convenient solution for financial advisors has just become a big headache, as they must now scramble to investigate and map out replacement funds, contact clients, and update portfolios over the next 30 days.”
Nally says that Kitces is just “one voice” that the firm has heard from about the platform changes. “We were very proactive in making calls and letting advisors know about changes and how it would impact them,” he explained.
While some advisors said the platform was “a great addition,” others told the firm they would “take a deeper dive and probably stick with what [they now] do,” according to the TD Ameritrade executive.
As for the length of the transition period, “Some said they need more time, that 30 days is tough. We heard that more than not,” Nally stated. “And we listened to our clients and wanted to be as accommodating as possible.”
As for why Vanguard isn’t on the commission-free platform, TD Ameritrade “invited them to participate and has lots of respect” for the fund provider, according the executive, but “they do not want to work with us to offset the servicing costs involved in offering [their] funds for free. Getting nothing to offset these costs is not sustainable for the long run.”