You may know that Guidepost Financial Planning uses TD Ameritrade as its broker. They execute your trades, hold your securities and provide insurance on your investments. They’ve always been a low-cost brokerage house, but a couple of weeks ago they eliminated base commissions for online exchange-listed U.S. stock, ETF (domestic and Canadian), and option trades—moving from $6.95 to $0.00. (Option trades will now have only a $0.65 per contract fee with no exercise or assignment fees.) This is actually an industry trend. Charles Schwab and Interactive Brokers led the way on this with TD Ameritrade following suit one week later. Fidelity and E*TRADE are expected to eliminate commissions too.
How much will this mean to you? Well, it depends on your portfolio and the frequency of your trades, but you can get a feel for the total dollars involved when you learn that TD Ameritrade previously derived about 15% of its revenue from commissions — and dollars that don’t go into their pockets stay in yours!
Zero-commission ETFs (Exchange-Traded Funds) make a lot of sense. Examples include Vanguard ETFs and SPDR ETFs. For many investors, ETFs are an important part of their portfolio. They’re basically baskets of assets (like mutual funds) that are traded exactly like stocks (unlike mutual funds). No commission is certainly a good thing for investors, but don’t forget that ETFs have various other fees (similar to mutual funds, but generally lower). These fees vary, so it’s important to understand them when picking a specific ETF.
These non-commission expenses still need to be scrutinized to maximize the return on your investments. If you’d like some help thinking about the best way to benefit from the new commission-free structure, we’d be happy to help you think this through. Please visit our website or give us a call at 970.419.8212 so that we can discuss this important topic in a no-charge, no-obligation initial meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.