4

I have been happily buying units of IVV commission free via TD Ameritrade. They just revised their list of free ETFs and sadly IVV is not one of them. Most of the other institutions don't offer it free either (Fidelity does but I have some other issues with that).

So I'd like to know - what factors affect the likelihood that an ETF trade would be offered commission free (in the past, present or future)? For example, did Black Rock have some kind of temporary marketing strategy to build their fund capital? Was Ameritrade cutting costs and found that their strategy to make this ETF free was not profitable overall?

https://thefinancebuff.com/td-ameritrade-commission-free-etf-worse.html

5

Forbes has an article investigating this. Here are the key parts:

On line at the bottom of the list of funds there is an entire screen of grey-faded micro print which includes this telling disclosure:

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.

In other words, TD Ameritrade is now enforcing a pay-to-play for their so-called commission-free exchange-traded funds. They are willing to forego their $6.95 trading commission in favor of remuneration directly from the ETF vendors. Because Vanguard refuses to pay such money to custodians, they are no longer being allowed to play.

and

Joseph Giannone, a TD Ameritrade spokesman, was quoted as saying, "With any business decision, client needs are paramount, but the underlying economics of programs can’t be ignored. ... In line with industry practices, certain providers pay servicing, administrative or other fees. Vanguard elected not to be a part of the new program."

So basically it sounds like Vanguard, and presumably iShares as well, were unwilling to pay TD Ameritrade to continue offering their ETFs commission-free.

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    Very good article. Before you posted that I was thinking I was the only one who is really disrupted by this. Ultimately, I'm either going to start using my Fidelity account more, or start buying directly from Vanguard. – Sridhar-Sarnobat Oct 24 '17 at 4:08
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    I've heard several people mention this, it's definitely not just you. This is a good reminder of the risks of using a publicly owned brokerage as opposed to a shareholder-owned one like Vanguard. Not sure where a privately owned brokerage like Fidelity fits on that spectrum. – Craig W Oct 24 '17 at 4:43

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