Reminder from TD Ameritrade: We’re boneheads, in case you forgot

Maybe a holiday reminder?  It’s a busy time of year and people often forget stuff so TD Ameritrade thought they would send out a reminder to tell us how they FUBAR’d their ETF list and called it an “Enhancement”.

Thanks TD!

There is no such thing as forgiveness. People just have short memories.

Rustin Cohle (True Detective)

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TD Ameritrade Commission Free ETF Shenanigans Continue

Nowadays, the saying “put his/her/their foot in their mouth” is more appropriate than ever.  If they put their hand in their mouth, then they couldn’t keep making things worse, because hopefully they could no longer type (barring a Daniel Day Lewis “My Left Foot” kind of phenomenon).

TD adds another steaming pile of excrement to their already formidable accumulation of ETF Egesta (yes, I looked that one up and am loving it).   I was going to use the word “Shisno” but that is even more fringe.  LINK : SHISNO Def: Shisno’s are considered almost universally repulsive, partly due to the fact that their excrement produces its own excrement following initial defecation. It is most commonly used as a racial slur for humans, demonstrating the animosity of the two species.


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So now you have even more ETF’s to mismanage.  Data has shown that the more choices an individual investor is offered, the less able they are to make appropriate decisions about how to invest.  It’s much like choosing mint chocolate chip ice cream. If there is only one choice, it is a binary decision.  Choose or walk away.

But lets say they have:

  • Mint White Chocolate Chip
  • Mint Conflict-free Chocolate Chip
  • Mint White Chocolate Chip
  • Mint Dark Chocolate Chip
  • Mint Swiss Chocolate Chip
  • Mint Belgian Chocolate Chip
  • Creme de Menthe Chocolate Chip

Now I’m stymied by the choices.  In reality, they probably all taste the same. I’ll walk away feeling satisfied after ingesting only half a pint.  You know this is fiction because…

NOBODY EATS HALF A PINT AND STOPS.


 

So the current timeline is: Take away good ETFs from commission free list, then extend the window to cash out, and now give even more crappy choices.  All cleverly disguised under the banner of enhancement.

I’ve clipped the best of the lot, the SPDR’s which STILL don’t include SPY. In fairness, it includes the less liquid SPY relatives.

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VA and HSA


VA Medical Benfits and HSA

Since leaving my last job and becoming a 1099 contractor, I have returned to the VA system as a veteran with a service connected disability rating.  The biggest bummer about not having to have insurance was the potential loss of an HSA contribution.

HSA contributions are the triple tax free gift from the government to anyone, but most potent for earners who are phased out of other plans.

From IRS:

A-5.  An otherwise eligible individual who is eligible to receive VA medical benefits, but who has not actually received such benefits during the preceding three months, is an eligible individual under section 223(c)(1). An individual is not eligible to make HSA contributions for any month, however, if the individual has received medical benefits from the VA at any time during the previous three months.

So, as long as you have not received care in the previous 3 months, you can make a full annual contribution to your HSA without penalty.  This is great for healthy people.

The other option under consideration was going with the cheapest HDHP to enable the HSA, however the cost of HDHP would likely overcome any potential savings of the HSA.

TD Ameritrade backpedals on their “enhanced ETF list”…kinda

The original post is here.

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Harry Sit’s commentary is here.  

I pulled my entire Roth.  I encourage others to do the same. The best way to vote in a financial market is with your feet or dollars.

Although TD’s boneheaded move instigated it, I’ve been wanting to consolidate my accounts for a while but since there wasn’t really anything wrong with their platform, I didn’t bother.

Now their platform has something wrong with it.  I have to keep my other account with them which is invested in Vanguard funds.  I weighed exchanging their crappy new lineup for my low cost VG ETFs but decided against it.  I’d rather just pay the commission to liquidate if I have to keep my funds there.  There is no cost unless liquidating at this point.

It is true that it would be cleaner to exchange VG funds for their new lineup, in terms of future assets.  Using their new funds with VG funds doubles the holdings, but hey, I’m not planning on doing anything with my triple tax free account for a long time.  I’ll eat the commission when it comes due.

God only knows what new boneheaded plan they’ll have in place when I need to liquidate my HSA holdings.

Dear Valued Client,
Last week, you received an email about the upcoming launch of our new commission-free ETF Market Center. Since then, we’ve learned investors could use more time to evaluate the new fund line-up. So we’re extending the effective date to January 19, 2018, giving you 90 days to review the funds and make any changes.
The restructured commission-free platform triples the number of ETF choices to 296 – the most in the industry – including many that are among the lowest-cost core ETFs available in the market today. We’ve also increased exposure to 77 Morningstar categories, including such strategies as smart beta, actively managed, market sectors and commodities providing more options for you to tailor your portfolio. We appreciate that this is a big change and we want to make sure you have the time and information you need.
Key takeaways
  • We have extended the commission-free transition period for legacy ETFs until January 19, 2018.
  • All new funds are available to trade commission-free today.
  • After January 19, 2018, the 84 legacy funds will still be available at TD Ameritrade at the standard online commission rate. The remaining 16 funds will continue to be a part of the enhanced ETF Market Center.
  • All other previously communicated changes remain in place. Enrollment and short-term redemption fees will be eliminated effective November 20, 2017. Selling legacy ETFs prior to November 20,2017 may incur a short-term redemption fee.

TD Ameritrade’s Boneheaded “Enhancement”

TD Ameritrade sent a very blandly worded email claiming an “enhancement” to their ETF lineup.  This removes all Vanguard ETFs from their commission free list.  Of course, only someone with no cognitive ability would see this as an enhancement.  I initiated my account transfer today.

 

Here are some screenshots to demonstrate why:

In the above table, you can see that AUM is 1/20th of two other two big boys in the market (not exhaustive, only representative).  A clever move would have been to include the original SPY Spider but of course they didn’t.  You have a palette of relatively less liquid specialized ETF’s that would be very difficult to figure out your asset allocation accurately.

The spread of their “enhanced” fund is the largest of the three, which is not surprising given the it’s the smallest of them.

Roughly similar performance.  I’m not really sure why the AVG market cap is equal in this table because their AUM is different on every other listing.  Either I don’t understand what market cap refers to in an ETF or it is reported incorrectly.

Anyway,  if you needed an excuse to move to a better commission free platform, both Schwab and Fidelity are better platforms IMO.  And of course, the mother of them all Vanguard is a possibility, but  I don’t have familiarity with their platform.

 

 

AUM Fees and Financial Planning: The Odd Couple

This is a really great article.  If it doesn’t offend you, maybe you are better off with an AUM model for financial advice.

 ARTICLE 

The fact is that it is no mathematically harder to manage $10,000 than it is $10,000,000 from the asset side.  If they are doing a lot more then MAYBE it would be justified to have a decreasing sliding scale of AUM.

For example, let’s say you hit $10M and they start coming up with strategies for retirement.  That would include RMD’s, Social Security, and intervehicle conversions (partial or full conversions to Roth, recategorizing “horse race” funds, etc) to maximize tax efficiency.

A Thumbnail Sketch of Insurance for Residents

This is an excerpt from an email exchange with current resident responding to questions about insurance.


Disability Insurance for Medical Residents

There really isn’t a need to buy further disability until you are about to enter practice.  I did and continue to find DI one of the most frustrating insurance aspects of being a professional.  The fact of the matter is that during residency, there is very little income to replace and policies are written based on how much you earn.  I believe REDACTED  with DL DAVIS representing Mass Mutual was the rep for NCBH and that is who I purchased my policy from as a fellow but I did a LOT of shopping.  It’s an expensive policy per annum and not one you want to get wrong, and truth be told, I still don’t know if I got it right.  I’ve had an independent review on my checklist for something like 8 years but never get around to it.  Honestly, I’d love to see the residency have a independent expert come in and talk about disability insurance even it has to pay.

TL;DR: Disability is for practice when you have a lot of income to replace.


Life Insurance for Medical Residents

Life insurance however will never be cheaper than now, which is why I made it a homework assignment for the first talk.  Every resident should have at least 500K if not a 1M policy.  The policy needs to be able to cover your family until they get back on their feet.  While most types of debt will be discharged in death, any cosigned debt will fall the survivor.  That is also what life insurance is for.

Life insurance is a relatively simple, highly regulated product.  I’m referring only to TERM LIFE.  All other forms of life insurance need a thorough independent (not the selling agent) review.  Pretty much all other forms of life insurance beside term pay huge commissions to the salesman/broker and that’s why they are heavily marketed for doctors.

I’ve been in many arguments about TERM versus other forms and the arguments are short; they end up with me saying to please bring in a spreadsheet showing how this other policy is better mathematically, and I’ll concede defeat.  Not 1 person has ever done the math.  There is often a lot of commentary that is usually along the lines of “but this has cash value”.


Rule #1: People suck at math.


Towards the end of training, I recommend an umbrella policy which is also quite cheap but usually requires modification of existing homeowners and auto policies.  The reason is that if a roofer falls off your house, he could go after future earnings.   Same with any other type of liability.  Umbrella insurance is cheap and protects you against a lot.

Slander someone?  It might cover you.  House catch fire and set the neighbors house on fire and they sue you?  Covered.  All sorts of intentional and unintentional acts are covered by umbrella policies.  It’s reinsurance for the common man (reinsurance is what insurance companies use to cover excessive losses).