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TDAI Advisors Given 90 Days to Move to New ETF Platform

After advisors complained about the limited time frame, the firm has extended the transition period for them to make changes before its new commission-free ETF lineup goes into effect.

In response to advisor backlash, TD Ameritrade has extended the transition period from 30 to 90 days for advisors to move over to its new commission-free exchange traded fund platform.

“We announced that last week, and we’re working with clients to inform them of the changes,” said Tim Hockey, president and CEO of TD Ameritrade, on a conference call to discuss the firm’s earnings. “We understand it will take some time to assess the new funds, particularly our advisor clients. In fact, we’ve extended the transition period to 90 days to help them decide whether or not they want to make changes to their portfolios.”

While TDA’s new commission-free ETF lineup expands the options from 100 to 296 funds, it removes 84 funds, including all of Vanguard’s products and many of the iShares style box funds. Many registered investment advisors on TDA’s custody platform took to Twitter to voice their frustrations. Many of them use Vanguard products in their existing client portfolios, so they either have to revamp their models to include ETFs on the new list or pay TDA’s $6.95 ticket charge.

And many RIAs on the custody platform weren’t happy with the 30-day time frame they had to make changes.

Blake Street, founding partner and chief investment officer at Warren Street Wealth Advisors, a registered investment advisor in Tustin, Calif., was upset with the way the news was communicated to advisors and the brief timeline they were given to make adjustments.

“Literally every single client account that we have holds Vanguard ETFs, and in most cases, multiple Vanguard ETFs,” said Street, whose firm has about $96 million in client assets, $65 million of which is custodied at TD Ameritrade Institutional.

“For anyone that’s looking at the platform with a fresh set of eyes, it’s kind of a non-event,” he added. “But for firms that are already using the legacy no transaction cost platform, there’s a lot of considerations, such as all the clients that hold it as of now, especially in non-retirement accounts, how do you phase them out of those positions? If you do it all at once, are you incurring short-term cap gains or long-term cap gains? So you’re just essentially creating a taxable event to get it in line with the new updated ETF platform.” 

TDA’s new commission-free lineup includes State Street Global Advisors’ new SPDR Portfolio ETFs, a suite of 15 low-cost ETFs, three of which will track new indices. Many of these new SPDR ETFs now have lower expense ratios than the lowest fee ETF in the category, according to State Street Global Advisors: for instance, the Vanguard Growth ETF (VUG) was on the platform, and charged an expense ratio of 6 basis points. The SPDR Portfolio S&P 500 Growth ETF (SPYG), which was 15 basis points, has been reduced to 4 basis points. But some advisors cautioned that trading costs could be higher for the new entrants. 

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