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TD Ditching Vanguard ETFs Could Hurt Clients, FAs Say

October 30, 2017

TD Ameritrade’s recent decision to remove Vanguard’s ETFs from its platform may hurt smaller investors, some advisors tell the Wall Street Journal. Some are thinking of taking client assets to a different brokerage, according to the paper.

Earlier this month the discount brokerage announced it is tripling the number of ETFs in its commission-free program but all Vanguard ETFs and some funds from iShares were dropped, the Journal writes.

Advisors tell the paper that the new additions are often less liquid, and staying in funds excluded from the commission-free program will cost their clients more, particularly for those with more modest accounts who tend to invest smaller amounts over time. In addition, switching their clients into some of the new funds would trigger capital-gains taxes for some clients, Gabriel Pincus, president of GA Pincus Funds, tells the Journal. But for some advisors, many of the dropped funds made up significant portions of their clients’ portfolios and they’re now evaluating moving their clients’ assets elsewhere, they tell the paper.

Pincus tells the paper that he’s talking to TD Ameritrade’s competitors to see if moving some clients out could work. But because a move to another platform could be costly, he’ll likely stay on, he says. To make up for the increases in trading fees, Pincus says he may discount his management fees, according to the Journal.

“That’s why I’m furious — it hits my bottom line,” he tells the paper.

Last week TD Ameritrade extended the transition period in response to such complaints, according to the Journal. Advisors will now have until Jan. 19 rather than Nov. 20 to make adjustments, which Thomas Nally, president of TD Ameritrade Institutional, said is “ample time for advisors to evaluate their portfolio construction,” according to the Journal.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.