What is it about TD Ameritrade that allowed them to cover such a wide range of products suited for America’s vast range of retail, private, & corporate investors? In this TD Ameritrade review, I’ll tell you all about their electronic trading platform, which extends throughout various financial assets including stocks, futures, ETFs, Mutual Funds, Forex, Fixed Income, Annuities, and even Cash Management and Lending. I’ll also talk about upcoming access to Cryptocurrency Trading (which is currently only available to qualified clients).
I just love how this ‘old-timer’ brokerage platform started off more than five decades ago, using the name First Omaha Securities, Inc. Remember that this was back in 1971 – that’s the time when the big old Securities and Exchange Commission (SEC) banned fixed brokerage commissions. Through establishing itself as Ameritrade Clearing Inc. in 1983, merging with TransTerra in 1996, acquiring various innovative firms in the succeeding years, and eventually acquiring the TD Waterhouse from Toronto-Dominion Bank in 2006, TD Ameritrade was brought to life and has grown into the brokerage giant that it is today.
Let’s not forget however that, as of writing this, Toronto-Dominion Bank still owns a huge 40% of the company with their main headquarters in Ohama, Nebraska. However, Charles Schwab Corporation (another brokerage giant) announced in late 2019 their intention to acquire TD Ameritrade and have the corporate headquarters relocate to Texas sometime in 2020. The combined company will leave Toronto-Dominion Bank with a more reassuring 13% minor ownership stake.
The key people in the growth of TD Ameritrade are Tim Hockey as CEO (he’s that quirky guy often offering market insight on CNBC), Joe Moglia as Chairman, Joe Ricketts as Founder (this guy is worth over US$ 2 billion, also started DNAinfo.com), and Steve Boyle as CFO.
Here’s my favorite interview with the CEO, Tim Hockey – from 2019:
Advantages of using TD Ameritrade
- Commission-Free. As of October 2019, it is free to trade online stock, ETF, and option trades. Looks like TD Ameritrade is going after Robinhood.
- Tax-loss Harvesting. With this option, investors may be able to reduce the burden taxes have on their financial plans. I just adore this piece of accountancy genius.
- No Minimum Opening Deposit. Gotta say well done that there’s no minimum investment for new accounts. We all know lack of barriers make it easier for beginners to start investing as soon as possible.
- Widest Range of Securities. There’s actually a huge number of different financial assets suited for any kind of investor. Depending on the type of investment you choose, they also have an array of differing accounts to optimize pricing.
- Acclaimed Trading Platforms. Investors can manage their account and trade through any of their several trading platforms. These offer the investor the option to trade through desktop, mobile, or even on their Apple Watch.
- #1 Trading Platform. The platform that stands out the most from all that TD Ameritrade offers is the ThinkOrSwim Trading Platform (purchased by the former in 2009), which has been voted by Barron’s as the number one trading platform.
- Best Educational Resources. Apart from other award winning data analytics providers, clients can now access reports, reviews, and ratings on over 10,000 investments with New Constructs, a well-trusted research firm utilized by many elite organizations.
- Early Market Opportunity. With extended trading hours overnight, you can react in real time whenever news (or emotions!) break. Yes, I know trading securities 24 hours a day, five days a week can cause sleep issues. But this also means you can access more of the market, especially international sectors, on you own schedule.
Disadvantages of using TD Ameritrade
- Cluttered Website. I’ve been complaining about how disorganized and cluttered the user interface is. I told support that it’s just not user friendly enough, especially for beginners. In order to trade efficiently, you’ll have to download their partner platform, Thinkorswim, which happens to be one of Broker Crtitic’s most recommended platforms, so it somewhat evens out.
- Breach of Security. The company has had its share of security breaches. Back in 2007. Hackers gained access to its clients’ sensitive information. TD Ameritrade was eventually sued. In my opinion, we can forgive and forget. This happened a long time ago. We know they’ve on-boarded veteran developers and OPSEC insiders since that epoch.
- Auction Rate Securities Scandal. A couple years after their infamous security breach, TD Ameritrade found itself amidst a lawsuit stating it sold auction rate securities as short-term investments. This would have been alright, except resulted in major losses for its investors. The company eventually compensated everyone for this.
- Reserve Money Fund Losses. $1 billion of TD Ameritrade clients’ securities were frozen during the financial crisis of 2007-2008. Here’s what I really dislike: it was TD Ameritrade that had convinced its clients to invest in specific money market funds, and they in-turn received huge commissions for these. I told you my assessment of TD Ameritrade was going to uncover scandal ! Eventually the company was arraigned for having a conflict of interest, possessing deplorable marketing ethics, and for giving a false account on the reliability of the investment.
- Trading Fees too high. The company charges $6.95 per trade of stocks or options, making it $2 more expensive compared to CharlesSchwab and Fidelity.
- Money Transfer Options. Only accepts bank transfers, making it a little more tedious for those who prefer to use their credit/debit cards or electronic wallets. Time to wake up the UX team – because I know the millennial crowd are not going to like this.
- Mostly only US or Canadian users get fast-approved. Rivals like International Brokers are more welcoming of European and Asian customers.
Trustworthiness of the broker
With every investment opportunity comes the speculation regarding just how reliable one’s chosen broker really is. At Broker Critic, we know you’re entrusting hard-earned money in the hands of these companies. The initial factor to take into consideration is how long the company has withstood the test of time. And in the case of TD Ameritrade, it has been a good while indeed. I’ll remind you that the company was established in 1971, making them mainstays for half a century now. Through the years, it has merged and acquired several subsidiaries, bringing in new features and fresh ideas with each collaboration.
TD Ameritrade is regulated in the United States of America by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Knowing that it has been regulated in the world’s most powerful nation (not just military, we’re talking financial power today !) always puts my hesitations at bay.
TD Ameritrade is part of the US Securities Investor Protection Corporation (SIPC). Because of this stocks and options are protected up to US$ 500,000 and cash is protected up to US$250,000. TD Ameritrade is both tied to banking and listed on the stock exchange. Its banking license means that the company retains a stable economic standing and can sustain itself in cases of major dips in the market. This also gives better access to liquidity during financial crashes. Being listed on the stock exchange indicates less counterparty risk because these firms are mandated to disclose more information, making them more transparent to its investors. I also appreciate that should I wish to meet up with a representative, there are over 100 locations to do so within the United States.
- Support: 7/10. TD Ameritrade offers very sufficient customer service compared to some competitors such as Robinhood, and the Europe-based Swissquote, which were all reviewed to have rather poorer troubleshooting process. TD Ameritrade provides several support options that are available 24/7 such as phone, text, live chat, and email. Apple users may also reach a representative via iMessage. Overall, users report that TD Ameritrade has impressively polite and professional team members who are willing to lend a helping hand any time of day (and night!).
- Research: 8/10. Arguably with much better trading research than Interactive Brokers, and Vanguard, TD Ameritrade offers an extensive amount of research tools obtainable by all its clients. With an account, users then have access to trading and investing reports from highly reputable research companies such as Research Team, S&P Columns, S&P Research, Jaywalk Consensus, Market Edge, and New Constructs.
- Web: 8/10. TD Ameritrade’s website may not be the most user-friendly platform but their partner Thinkorswim solves that issue. It has been rated very highly by TD Ameritrade’s clients for their excellent tools, ease of use, and overall flow. Some may argue it is the best integrated platform yet, especially once compared to Vanguard’s platform options which have been reviewed to be way behind on improvements.
- App: 7/10. TD Ameritrade’s app is comparable to their website user interface. Mobile Trader, the mobile app companion to the reputable thinkorswim platform is also a good one that I like to use. It performs better compared to Saxobank’s SaxoTraderGo, which reportedly crashes regularly and lacks optimal security measures.
Trading products available
The variety of trading products available through TD Ameritrade is evidently much more than most of the company’s competitors. Here is a list of instruments available:
- US Equities
- EU Equities
- Japan Equities
- Hong Kong Equities
- Mutual Funds
TD Ameritrade charges moderately acceptable trading fees at $6.95 per trade for both stocks and options. Though this is considered average, it is more expensive than CharlesSchwab and Fidelity which both charge a low fee of $4.95. Its advantage over some competitors is its zero commission on mutual funds.
Other advantages of TD Ameritrade are that it does not charge an account fee nor an inactivity fee. Its borrowing fee is at approximately 6%.
Opening an account with TD Ameritrade is done entirely online and requires the user’s passport details. I don’t like how the approval time is rather slow. This is tied to the initial deposit time, taking an average of approximately one week to process. There is no minimum initial deposit, which benefits many traders that are just starting out. You may deposit and withdraw into your TD Ameritrade account through bank transfer. Tho a withdrawal fee of $75 will be taken each time.
According to Similarweb, TD Ameritrade currently receives about 14.64 million visitors on their website per month. 94.21% of visits come from users located within the United States, with Taiwan and Canada following in second and third, respectively. However, rival & competitor Fidelity’s traffic rate is exceptionally higher at 68.14 million. Ameritrade currently ranks #9 on Similarweb’s Top Ranking Websites under the “Finance > Investing category”.
Alternatives to TD Ameritrade
- A great alternative to TD Ameritrade is the US based stockbroker, Fidelity. It is one of the largest US brokers with much cheaper fees and the option to utilize electronic wallets for withdrawals.
- Another company worth consideration is Interactive Brokers, it is one of the most popular US based discount brokers and has licenses from various top-tier regulatory bodies. Compared to TD Ameritrade, it offers a complete range of products, including Bitcoin and CFD with excellent trading and usage fees. International users are also very welcome. One downside, however, is they charge an inactivity fee of US$10 per month.