Custodial Accounts at Ally Invest
Ally Invest offers several resources that young traders can take advantage of. One of these is the custodial account, which can be opened online in just a few minutes.
Introduction to UGMA and UTMA Accounts
UGMA and UTMA accounts are both available at Ally Invest. Both of these are custodial accounts. Every state in the Union uses one, but not both, of these. The exact account type is based on the state of residency of either the minor or the custodian. Either can be chosen at the time of application.
The custodial account in either version has some nice tax advantages. The first $1,300 in earnings in
a tax year (as of 2024) is tax free. The next $1,300 is taxed at the child’s tax bracket, which is
usually lower than the parents’ bracket. All earnings over $2,600 are taxed at the parents’ rate.
There is no contribution limit on a custodial account, which is another advantage not found with all minor brokerage accounts. Gifts can be made to minor accounts up to $32,000 per tax year, per couple, tax free.
How to Open a Custodial Account with Ally Invest
Ally’s website has a user-friendly and can be used to open a custodial
account. It can be opened either in self-directed or robo-account mode. To access the robo-account application, you need
to start on the robo page.
The self-directed hub delivers the self-directed application.
On either page, click on the blue button to open an account. If you already have an Ally login, some information can be pre-filled. Just look for the radio button to enter login credentials. Once past this initial screen, you’ll need to select an account type, which of course will be custodial.
The names, addresses, and Social Security Numbers of both the custodian and the minor must be entered on the application. For a self-directed account, other features like options trading can be attached. For a robo account, several questions will need to be answered. The automated account is an advisory account, and like any other advisory account, the broker will select investments based on the client’s financial picture. Hence, the questions.
Submit the application and the account should be opened immediately.
Custodial Account Fees at Ally Invest
Ally’s custodial account has the same fees schedule as any other account with the firm. This means
$0-commission fees in a self-directed account on most U.S. equities (penny stocks do have a $4.95 base
cjarge plus a $0.01 per-share surcharge).
Mutual funds have either a load or a $9.95 transaction fee (applied to both the buy and sell sides). Options have no base charge but do carry a 50¢ per-contract charge.
A robo account will cost 0.30% or nothing, depending on the cash buffer chosen.
Custodial accounts at Ally have no account fees like low-balance, maintenance, or inactivity charges. Trade confirmations do cost $2 if received in paper format.
Better Custodial Account
Custodial accounts are of course available at many other financial institutions, and some of these
offer benefits that Ally Invest doesn’t provide. For example,
Charles Schwab
offers $0 commission on stocks, ETFs, and 4,200 mutual funds. There are no
account fees whatsoever. Charles Schwab has a richer selection of investment products, and the best trading and research tools.
Visit Charles Schwab Website
Open Schwab Account
Education for Beginning Investors
Ally Invest offers a moderate, although not large, amount of learning resources for beginning investors. On the Ally website, a good place to start is under the Education tab. There are articles on several trading topics. These include bonds, stocks, options, mutual funds, and ETFs. Robo customers will have access to this library, so they can learn about these topics while their accounts are on autopilot. Here are a few sample articles:
- How to Invest in Bonds 101
- Mutual Funds vs. Index Funds: What’s the Difference?
- The Rookie’s Course on Options Trading
Some of Ally’s articles have embedded videos, which is helpful.
Screeners for bonds, equities, options, ETFs, and mutual funds are available on the Ally Invest site. They will be found under the Quotes & Research tab. These would be helpful for self-directed traders.
Besides the investing resources, Ally Financial also delivers information on personal finance. This, of course, is in partnership with Ally Bank. These materials would be very good for young people learning about finance. Topic areas include car shopping, taxes, college, and finance basics.
Examples of articles we found include:
- Trade-in or Sell Your Car? The Upsides and Downsides
- How to Talk Finances With Your Fiancé Without Freaking Out
- What is a FICO score?
Other Accounts at Ally Financial for Young Savers
Besides the UTMA/UGMA account, Ally Invest also offers the Coverdell Education Savings Account. This account has a somewhat more generous tax policy, with no caps on tax-free growth. However, withdrawals can only be used to cover educational expenses, while withdrawals from a custodial account can be used for any purpose.
Ally Invest also offers trust accounts, and these could be used to save for children or grandchildren.
Ally Bank, an affiliated company, offers FDIC-insured custodial accounts. These can be opened as savings accounts, money market deposit accounts, or certificates of deposit.
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