TD Ameritrade Review

TD Ameritrade stands out in the discount brokerage industry for offering highly-accessible customer support, in-depth and comprehensive research, and no minimum account sizes while offering commission prices that are competitive with its peers. These are some of the main reasons it landed a spot on our best online stock brokers for 2019 list.

In the article below, we’ll review TD Ameritrade item by item, looking at everything from commission prices to ATM fees to show you everything you need to know before you open an account.

All brokers try to curate a list of features and benefits that are in some way different from their many competitors. We think it’s important to identify areas where a broker goes above and beyond the competition to provide a solution that sets it out from the rest of the pack. There are five areas where we think TD Ameritrade really shines, though how much each feature or benefit matters really depends on your personal needs.

Here are the five things TD Ameritrade customers tend to like about the brokerage:

• Research and screeners -- TD Ameritrade offers a laundry list of stock, option, and mutual fund screeners that you can use for free. In addition, customers enjoy access to research from third parties including Morningstar (for mutual funds), Moody’s and S&P Global (for fixed income) and stock analysis from a host of investment firms.
  
• TD Ameritrade app -- Investors rate the broker’s mobile app highly. Available on iOS, Android, and Windows devices, the mobile app is truly fully-featured. Clients can get streaming data, invest in mutual funds, or trade stocks and complex options contracts with a mobile device (smartphone) or tablet.
  
• Fund selection -- TD Ameritrade offers one of the largest selections of mutual funds and commission-free ETFs of any discount broker on the market today. Many brokers cater primarily to active investors and traders, but TD Ameritrade does a good job balancing the needs of stockpickers and hands-off fund investors alike.
  
• Customer support -- With branch offices in most major metropolitan areas, TD Ameritrade may win over clients who want the comfort of knowing that face-to-face customer support is just a short drive away.
  
• No minimums -- Whether an investor is just getting started, or rolling over a $1 million 401(k) into an IRA, TD Ameritrade can take them in. TD Ameritrade doesn’t have a minimum deposit requirement to open an account and start placing trades, which is a real benefit to beginning investors.

Ultimately, the biggest advantage of using a discount brokerage firm to place a trade is their cut-rate pricing. TD Ameritrade customers will find that it makes it relatively inexpensive to buy and sell stocks, ETFs, options, and mutual funds online, though it isn’t necessarily the cheapest for all types of trades. The table below shows its standard pricing for different types of trades.

As you can see, TD Ameritrade’s pricing blows away full-service brokers, though it charges about $2 more per trade than many other leading discount brokers for standard stock trades. Of course, investors who trade infrequently are likely to see a $2 difference as a rounding error, justified by other features the broker offers, as well as ETFs and mutual funds that you can invest in for free.

Though price isn’t everything, frequent stock and options traders might see its higher stock and options commissions differently, given that those who trade more inevitably pay the most in commissions.

One area where TD Ameritrade really shines is in mutual funds and ETFs. That’s because it has one of the largest selections of mutual funds, as well as one of the lengthiest lists of ETFs that its clients can buy or sell without paying a commission. Investors who are thoughtful about using these “freebies” can significantly reduce their trading costs, which can be a major advantage for fund investors.

TD Ameritrade’s commission-free ETF list includes well-known fund managers and issuers including iShares, State Street (SPDR), WisdomTree, and Invesco. So long as you hold an ETF for at least 30 days after the last purchase, you won’t pay a dime in commissions to buy or sell ETFs that are on its list of free funds. But be aware that holding an ETF for less than 30 days will cost you in the form of a short-term trading fee of $13.90.

Brokers have long fee disclosures that you should read before opening an account. In doing this review, we looked at TD Ameritrade’s list of fees and benefits, and while nothing stuck out as particularly onerous, there are some fees (and rebates!) we think you should know about before opening an account.

• ATM fee rebate -- Many investors like having a debit card linked to their brokerage account, but don’t like the costs associated with it. TD Ameritrade has a very client-friendly policy with respect to debit cards, as it reimburses clients for ATM fees they encounter when using their debit card at another bank’s ATM. Reimbursements are unlimited, so whether you use your card daily or once a decade, you won’t pay an ATM fee.
  
• Paper statement fee -- Brokers don’t like sending documents by snail mail. Accountholders whose accounts are valued at less than $10,000 are charged $2 per paper statement. Opt-in to receive statements electronically, and you can forget this fee even exists in the first place. (Fees for paper statements have become an industry-wide phenomenon in one form or another.)
  
• Short-term trading fee -- Commission-free ETFs aren’t always free all the time. Note that TD Ameritrade charges a short-term trading fee of $13.90 when a customer sells a commission-free ETF within 30 days of their most-recent purchase. Thus, commission-free ETFs are better from a cost perspective for people who will buy and infrequently sell, rather than traders who are actively buying and selling ETFs time and time again.

Traders who like to have a fully-featured trading platform won’t be disappointed with what TD Ameritrade has to offer, as it offers web, desktop, and mobile platforms that make placing a trade a snap.

Its web platform is designed for fundamental investors, offering streaming quotes, custom alerts, and screeners to quickly sort through the market based on fundamental and technical parameters. Its highly-rated thinkorswim desktop platform is a favorite among active traders who need functionality like backtesting, level II quotes, and a graphic explanation of a position’s expected profit or loss.

TD Ameritrade’s mobile platform is no slouch, either, as it offers level II quotes, conditional orders, and even complex option trades on smartphones, tablets and other mobile devices. The app is available on iOS, Android, and Windows, thus making it available on virtually every platform, though users can also navigate to its website to trade from a smaller screen, too.

Investors use margin loans for two reasons. First, they can be used to add leverage to a portfolio, magnifying your investment capital with borrowed money to multiply your gains and losses. This is one of the most common uses of margin, though it significantly increases the chance of losses.

Secondly, margin loans can be used to make an immediate trade after selling a stock. Because it takes 2 days for a trade to settle, an investor who sells $10,000 of stock on Monday won’t be able to invest that money elsewhere until Wednesday. By using margin, the investor can skip the two day wait, and borrow the money while waiting for the funds to settle in their account.

As for what you’ll pay to use margin, TD Ameritrade charges interest based on a sliding scale. The more you borrow, the lower your interest rate will be. The table below shows margin rates by debit balance as of April 1, 2018.

Of course, investors who don’t use margin aren’t affected by margin rates. And those who use margin for only short periods of time (say, while waiting for deposits to clear, or cash from previous trades to settle) may not mind paying a slightly higher rate for just a few days. Interest is calculated daily, so carrying a small debit balance for a couple days may add up to just a few dollars.

Discount brokers are designed for self-directed investors who simply need to make a trade, not people who need a lot of help picking stocks or funds. That said, most discount brokers offer third-party and proprietary research, stock and fund screeners, calculators, and other tools to help their clients be better investors.

Some research tools worth mentioning include:

• ETF screener -- This tool can be really helpful for finding ETFs that fit your investment needs. With a few clicks, investors can drill down to find ETFs that match specific criteria such as funds that fit Morningstar’s large cap value category, have a below-average expense ratio, and can be traded commission free, for example.
  
• Analyst ratings -- TD Ameritade uses First Call Consensus to list stocks that analysts rank as strong buys. Its buy-rated stock screener can also be used to find stocks that are highly-rated by CFRA, TheStreet, MarketEdge, and Ford.
  
• Fixed income reports -- TD Ameritrade customers get access to bond reports by Moody’s and S&P Global, adding an informed view for people who want to know more about individual bonds and funds.

Discount brokers are able to offer lower fees and trading commissions than full-service brokers because they don’t offer many of the frills and handholding of a full-service brokerage firm. That said, TD Ameritrade doesn’t cut corners in being able to speak to a customer service representative when you need to.

One thing that TD Ameritrade has that many brokers do not is the ability to speak to someone face-to-face with any issues regarding your account. With hundreds of branch offices located in cities across the United States, customer support is just a short drive away. Of course, it also offers 24/7 support by phone, plus email, and text. Interestingly, it even offers customer support via Facebook Messenger, and you can even trade stocks by sending a message to its Facebook Messenger chatbot.

If the following statements apply to you, a TD Ameritrade account may be a good choice.

1. You value customer service and a local branch office. TD Ameritrade has one of the largest branch networks among discount brokers, making a good pick for people who want in-person customer service.
   
2. You use mutual funds and ETFs. With more than 2,200 no-load, no-transaction-fee mutual funds and commission-free ETFs, TD Ameritrade is an attractive choice for investors who use funds in their portfolios.
   
3. Research is important to you. TD Ameritrade has one of the largest research offerings among discount brokers, which makes it a good fit for investors who are willing to pay a slightly higher commission for more research and screening tools.
   
4. You don’t use margin as a core part of your investment strategy. TD Ameritrade’s margin rates are higher than other brokers, and carrying a large amount of margin can be costly. Given a modest, $5,000 average daily balance can cost $500 per year, investors who use margin may be better off with another broker.

As self-directed investors, we know the importance of picking a good discount broker to house our taxable and retirement accounts. We’ve examined many of the industry’s leading discount brokers to inform our views at The Ascent, comparing brokers on everything from fees and commissions to research and customer service to find brokers that offer what investors need at a price that won’t break the bank.