TD Ameritrade for Roth IRA?

Question

I have a Roth IRA with Edward Jones which is invested in Class A American Funds. I feel I'm being fleeced because the advisor receives a fee of 0.25 every time I invest money.

My 401k is managed by an advisor who deals with TD Ameritrade. He told me the fees for a Roth IRA in TD Ameritrade are much smaller than with Edward Jones and the American Funds. He said he doesn't take commissions.

Is TD Ameritrade a better place for my Roth IRA (generally speaking)?

Answer 1

The "fee'" is not charged by the mutual fund company, and not the broker/dealer.

If you fee that you're getting "fleeced" close account and move on.  If you don't trust the people you deal with, don't deal with them,

No TDAmeritrade is not a better place for your account, but they are just as good as Edward Jones.  Most major brokerage firms, all have the same fees, since most come from fund companies, but if .025% upsets you, move on and try to find someone cheaper.

Cheaper is not always better, most experienced investors have found its better to be with a more reputable firm than a cheap firm

Answer 2

Yes, absolutely.

No fees is possible at TDA.

Answer 3

I wouldn't be as concerned about the brokerage house, its the American Funds mutual fund that you are invested in. Thats where the real fees can be.

You can stay with Edward Jones, but get out of the mutual fund and either self direct your money or pick a different mutual fund.

Answer 4

Maybe and maybe not.  It depends on a lot of different things.  If you are invested in class A shares, Edward Jones should be getting their commission from American funds, not from you through the front end load.  Normally that is 5.5% I believe unless you have a special deal with Edward Jones.

You did not say whether Jones was charging you an annual maintenance fee.  Normally that is about $25 or so at that firm.

Now here is the trade off.  TD Ameritrade will charge you the same fee form class A American Fund shares, I am pretty sure.  They do have some funds--no load funds--where they do not charge a fee to buy, but they are limitied.  In general they charge 9.95 for each transaction of non-mutual funds.  For no load mutual funds they charge a fee of $50 per transaction except on the funds that have a special deal with them.   Now they do have quite a few open-end mutual funds that are not subject to the $50 transaction fee, including several of my favorites.

But one thing to consider is that American Funds has very low expense ratio, lower than most no load funds by an enough margin that over time other things being equal you will recouperate your 5.5% load.  

An example will surfice.

PRWCX, which does not have a purchase fee from Ameritrade, has an expense ratio of 0.71%.  Over a 10 year period the net returnof this fund is 10.7%.

AMECX, which does have a purchase fee, has an expense ratio of 0.54%.  Over a 10 year period the net return of this fund is 6.73% after load.  

In this particular case the advantage would be with TD Ameritrade if you had purchased PRWCX.