TD Ameritrade versus Wealthfront brokerage firm comparison: IRA, fees, commissions, benefits, pros and cons. Which investing service to choose?

Two Rivals: Wealthfront and TD Ameritrade

Wealthfront and TD Ameritrade are two very different brokerage firms with different styles of investment management. They do have similarities in some areas, however. This article will look at the two companies in vital categories, and try to determine what their strengths and weaknesses are.


Range of Financial Vehicles

TD Ameritrade offers its customers a large selection of stocks (including penny stocks), option contracts, fixed-income securities, unit investment trusts, ETF’s, mutual funds, closed-end funds, futures contracts, and forex. As for accounts, the broker offers a self-employed 401(k), 529 accounts, annuities, Coverdell education savings plans, and a range of IRA’s, including both SEP and SIMPLE varieties.

Wealthfront offers stocks (but not penny stocks), some mutual funds, and ETF’s. The broker-dealer does not offer futures, options, forex, bonds, unit investment trusts, or annuities. Several accounts that are available at TD Ameritrade cannot be opened at Wealthfront. These include the individual 401(k), SIMPLE IRA’s, Coverdell education accounts, and annuities.

TD Ameritrade easily wins the first category.


Investment Advice

Wealthfront is a robo advisor that uses advanced computer software to make trading decisions in its customers’ accounts for a small fee (0.25% per annum). It does not offer traditional human management or self-directed accounts.

TD Ameritrade offers both robo and human advisors. The former costs a little more (the fee is 30 basis points per year) and requires a $5,000 minimum to start. Wealthfront requires only $500.

While the robo package at Wealthfront looks more appealing, TD Ameritrade offers traditional packages that aren’t available at Wealthfront. Selections start at just 0.60% annually for one-on-one financial advice with a licensed human advisor. The minimum deposit at this price is a quarter of a million dollars, although the broker charges just 0.75% for packages with a $25,000 minimum.

TD Ameritrade has over 300 branch locations, which would be a good place to meet up with one of the company’s financial planners. Wealthfront has zero.

Overall, we think TD Ameritrade is the top choice here.


Trading Software

Wealthfront, as already mentioned, is a robo-only broker. As a result, it doesn’t provide a lot of self-directed tools. It doesn’t have a desktop platform or browser-based system. Instead, Wealthfront clients use the broker’s simple and user-friendly website to manage their investments.





During our research, we found tools for a variety of functions. For example, there is a calculator on its website that helps users estimate the cost of buying a home. There is another calculator to help figure costs of a planned vacation.

An account history displays contributions by year, and the percent allocations to investing sector, such as real estate or foreign stocks. Another small window shows the number of free trades Wealthfront’s algorithm has made, the amount saved through tax-loss harvesting, and the total dividends an account has received.

TD Ameritrade has a more advanced website with more sophisticated tools. There is a trade bar at the bottom of the window, something that is absent on Wealthfront’s site. The bar is able to submit orders for stocks, ETF’s, and options. It also has a string mode that permits order submission with just a string of text, such as ‘b75aep81.24’ to buy 75 shares of American Electric Power at $81.24 or less.


Ameritrade vs Wealthfront


TD Ameritrade recently retired its browser platform, but it still offers its desktop software free of charge. Called thinkorswim, the program offers some of the most advanced charting tools we have ever seen. We counted roughly four hundred technical studies.

The program’s order ticket is equally impressive with lots of complex order types and direct-access routing. Other great features include free streaming of CNBC, another stream of TD Ameritrade Trader Network, Level II quotes, and forex dealing boxes.

TD Ameritrade wins this category.


Mobile Apps

Transitioning to mobile apps, we see that Wealthfront offers a lot of the same tools as its website provides. We found basic account information, a graph of projected savings through retirement, home buying tools, and a savings tool. Another graph shows account returns. Besides these resources, the Wealthfront app doesn’t offer a lot.

TD Ameritrade actually provides three apps. One of them is a thinkorswim platform that comes with a lot of advanced charting tools. Direct-access routing for options is available, and we really like the video financial news. Futures and forex trading are big plusses as well. One of the three apps can trade mutual funds, and we like simulated trading available on the other two.


Ameritrade vs Wealthfront


We’ll pick TD Ameritrade here.


Retirement Services

Wealthfront’s website displays an account’s current value with retirement goals, such as a retirement age, estimated monthly expenditures during retirement, and a projected net worth at retirement. A small tracker displays how much a retirement account is saving per month on average.

TD Ameritrade offers many learning materials on retirement topics on its website. We found both articles and videos. Its selection of target-date mutual funds is also very good. And it provides more retirement accounts than Wealthfront does.

We think TD Ameritrade does a better job here.


Promotions

TD Ameritrade: Trade free for 60 days + get up to $600.

Wealthfront: none right now.



DRIP Service

Wealthfront doesn’t offer a traditional Dividend Reinvestment Plan. Instead, its software program takes cash dividends and reinvests them into under-performing assets an account holds. This helps to keep an account within target allocations.

TD Ameritrade clients can sign up for the broker’s traditional DRIP service that takes cash dividends from one security and buys additional shares of the same security.

Good arguments can be made for either system. We’ll call it a draw on this topic.


Our Recommendation

Perhaps the most important topic to look at here is whom to recommend for account management services. If you want stocks in your managed account, you’ll have to go with TD Ameritrade because Wealthfront only uses funds. While Wealthfront offers the cheaper robot, TD Ameritrade provides the more comprehensive lineup with its traditional management; so we think TD Ameritrade would be the better pick overall.


TD Ameritrade vs Wealthfront Summary

TD Ameritrade and Wealthfront are very different brokers, and even their investment advisory services differ. TD Ameritrade is the better value on the whole.



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