Zecco Trading announced on Friday via e-mail that they will be raising the minimum requirements to receive free trades on their accounts starting next month. Thanks to everyone who also alerted me.
Dear Zecco Trading client,
I’m writing to tell you that as of March 1st, 2009, we’re increasing the minimum level of assets needed to earn 10 free trades per month to $25,000. We’re also adding a new way to get free trades: customers who make at least 25 total trades per month will also qualify for 10 free stock trades per month.
Bummer! The change is blamed on current economic conditions, which is understandable, but also I fear for their community model. Their vibe up until now has seemed to include a lot of younger investors who are just starting out. $25,000 is a pretty high hurdle.
The upside is that since their last fee schedule change, their customer service and website has indeed improved over time. I just feel like they are split between customers like me who just want a bare-bones free system, and those who want “the kitchen sink” and free trades. I guess the latter isn’t realistic.
So now what?
Exploring Staying With Zecco
Small balances. If you trade less than 25 times per month, you pay $4.50 per trade. Still small, but not free. 🙁 If you make 25 trades per month at $4.50, but get 10 of them free, that works out to an average of $2.70 per trades. This isn’t the worse deal out there, but at this price point there are closer competitors now (see below).
Move assets over. The $25,000 applies to net assets. So if you have $25,000 in ETFs or other stocks in another brokerage that are idle, you could move it over and just leave it at Zecco to qualify for the free trades. One possible idea is to invest in a short-term bond ETF like PVI to maintain the minimum.
Exit Plan Options
Liquidate and close out your zero balance account. To avoid the $50 ACAT transfer-out fee for moving your entire Zecco portfolio somewhere else, you can sell all your positions, transfer out the cash, and then have them close the account. During February you’ll still get 10 free trades if you reach a $2,500 net asset balance anytime during the month. You may have to worry about realized tax gains and/or losses with this method.
Transfer to another brokerage with fee rebates. Several other brokers offer a rebate of the ACAT transfer fee if you move enough assets to their brokerage. Unfortunately, most brokers that I have found set the minimum transfer amount to be of $25,000 in assets (FirsTrade, SogoTrade, Scottrade).
However, TradeKing brokerage will credit your transfer fees if you move just $2,500+ over to them. They offer $4.95 trades with no minimum balance requirement. For more details, see my TradeKing review here.
TradeKing will credit your account transfer fees up to $150 charged by another brokerage firm when completing an account transfer for $2,500 or more. Offer applies to new non retirement accounts funding for the first time.
Other Deep Discount Alternatives
Here are some more brokers with rock-bottom commissions. Rates are for non-IRA accounts.
Wellstrade, the brokerage arm of Wells Fargo, offers 100 free trades per year if you have a net asset balance of $25,000. However, you’ll have to open up a PMA checking account and keep some activity going in their every month or so. If you don’t, they’ll close the checking account and you’ll lose the 100 free trades.
Just2Trade offers $2.50 trades with a $2,500 minimum account balance. It is targeted at “experienced investors”. To get approved for an account, you need to state that you have 2+ years of investing experience and know how to use margin, amongst other things. Electronic statements are free, paper ones are $5 per month.
SogoTrade has $3 trades with a $500 minimum. Electronic statements are free, paper ones are $5 per month.
Of course, low commissions shouldn’t be the only consideration for a brokerage firm, it just depends on what you are looking for. I may need to move my “fun money” account elsewhere now.
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I don’t see how they can earn a profit even at $4.50/trade. Although it feels good to get an unbelievable deal, I would rather businesses operate on a fair but sustainable model. I have been using Scottrade for many years. Paying $7.00/trade is fair and they have a sustainable business. It also enables them to avoid a number of annoying fees–or at least keep them low.
Don’t forget Sharebuilder.
You can open an account there with one of their $50 bonuses and then transfer your account. Then if you can pay $12 for 6 trades a month. If you use all 6, that’s $2 a trade, and just $2 more for each additional. You could also pay $20 for 20 trades, so that’s $1 a trade.
This is what I’m thinking about doing, Sharebuilder is where I had an account before I moved to Zecco.
wow…i was just about to open a Zecco acct until i read your blog. what a bummer! so where are u thinking of switching your fun money too? can u do a review of it?
It may be a very easy question:
What if the WTDirect goes bankrupt. I understand that they are FDIC insured, what is the process we have to go through in that case?
Can anybody please answer?
Thanks,
-Ashu
Interactive Brokers has trades for $1.00 for 100 shares.
Minimums $10,000, under 21 $3,000
Would rate them top % in online discount brokers..
Another option is Bank Of America investment which has 25 free trades per month if you have $25,000 in the investment or banking accounts. Good deal if you already have a BOA account.
Interactive Brokers is cheap and targeted at active traders, but you need to spend $10 a month every month, or else you’ll be charged $10 per month anyways.
Bank of America requires $25,000 in *cash*, not total asset value. It does not count value of stocks and mutual funds into the $25,000 minimum.
Some comments about the Wellstrade account – first, it takes more than a month or two of non-activity on the checking account for them to do anything, and even then they didn’t close the account. When I got notice of it (and I think it was close to a year of non-activity), all I had to do was call them and get it re-established.
Second, I should note that it is 100 free trades a year PER ACCOUNT linked in. I’ve got a taxable account, two IRA’s, 2 Roth IRAs, and a rollover IRA, and each account gets 100 free trades a year. I don’t use anywhere near all that – in fact, I probably use less than 100 total – but it is good to know if you are more active than I am in trading.
Can anyone who uses these cheap online brokerages attest to the quality of their executions? Are their executions as good as the more recognized firms like ETrade, Ameritrade, or Schwab?
I am concerned that these cheap-guys might be skimming a spread off each trade and not giving you the best price available. Then you’d actually wind up paying more in a “hidden” way.
A while ago I got 100 dollars free for opening up an account with TD Ameritrade. You can ask around to see if there are any deals like that.
Agree that Interactivebrokers is one of the best. Only $1 a trade up to 100 shares with access to almost any investment you can think of
Hold up… $4.50 per trade or (2.70) at Zecco, vs.
Trade King $4.95 trades.
Why would you transfer based on that, even if they if it was free? Am I missing something here?
I’ve never really understood what makes a good broker/bad broker.
I put in a buy order. The order is executed within a few minutes (or sooner) of when I placed the order and it’s done.
Anybody care to explain to me why one firm’s trade is worth $7 and another’s worth $20???
@SuperSaver / Red / Rick –
I have a Wellstrade account in addition to a Fidelity account. The Wellstrade offers 100 “free” trades per year. They may appear to be free but they aren’t free – they are making it up on the execution price of the trade. I’ve pulled quotes simultaneously from Wells and Fidelity, and Fidelity will consistently offer better price execution.
I placed a trade a week ago on Wellstrade – I bought 100 shares and paid .08 more than the ask on Fidelity’s site. That’s an $8 differential, which makes Fidelity’s $8.95/trade look a lot more reasonable.
Free trades have their place – if I’m gonna hold a stock for 10 years, then that $.08 probably doesn’t really matter much. But you should know, there *is* a difference.
Neil: Thanks for the feedback on your execution experience with Wellstrade.
Many years ago, AmericanExpress brokerage used to offer “Free” trades with a certain minimum asset balance. I had noticed their offering ASK prices almost always consistently quoted higher than those quoted at the same time at ETrade. Over time, I felt ETrade had consistently filled my orders with better prices. Getting a few cents worse on AmericanExpress on a regular basis multiplied by many hundreds of shares and many orders, made me realize there is no “Free.” There was a middleman standing in the way who won’t execute the trade unless I paid that hidden spread.
I am worried that Zecco, Just2Trade, et al., might also be skimming on the execution of the trades.
I have a WellsTrade account and start to develop a negative feeling about it.
1. the website is damn slow. It takes 15 seconds to log into my brokerage page.
2. page navigation is slow and trivial. Most feature I used regularly require more than 2 clicks. (open top menu and open sub menu). Absolutely no ajax supports.
3. does not support scheduled trade.
I am satisfied with Zecco’s execution. I don’t care that the platform doesn’t offer streaming real-time quotes and other perks. I do my own research and I need a broker where I can buy the stock. If you are unsure what to buy/sell, then your arrangement will always be very expensive.
My firm uses Fidelity as custodian for our managed accounts — I have used others and frankly find Fidelity to be of highest value to the retail investor. Happy to answer any questions. Best, Jason
sad news. I was just beginning to play. Now I will have to close the account.
Neil,
You probably have a point there with Market Orders. But 99% of the time I use Limit Orders and I set the price at which I want to sell/buy. Price diiferential probably would not matter with Limit Orders. Any thoughts? Thanks.
“Then if you can pay $12 for 6 trades a month. If you use all 6, that’s $2 a trade, and just $2 more for each additional. You could also pay $20 for 20 trades, so that’s $1 a trade.”
This is for their automatic investment plan only, not real-time trading.
I have a Zecco account but will now be closing it. I’d guess 95% of their customers joined because of the terms that offered these free trades. Now that the free trades are gone and their prices are just like everybody else, there is no incentive to stay w/ them whatsoever, considering their awful customer service and interface.
They’ll be out of business by the end of the year.
I use scottrade because they seemed to be the best broker in terms of being upfront with their fees while still being cheapest. I was annoyed to find out that they don’t allow you to withdraw using ACH, ACH is only for deposits. They will do free check writing once you hit $5,000. I have been tossing around the idea of switching to Sogo, but then I found out they don’t reimburse transfer fees unless you have $25k.
Being an 18 year old and trying to invest is an incredibly annoying experience, you would think that brokers would want to make a life long customer out of someone who is 18. Unfortunately brokers have a large number of minimums you need to meet in order to get adequate service.
Also John I paid for 25 INGdirect referrals, I only got 24 commissions. I assume this means someone signed up with less than $250. I sent you an email about this but you didn’t respond….
I have wellstrade account and always use limit trade and get execution fairly timely.
Hi…
I am concerned that these cheap-guys might be skimming a spread off each trade and not giving you the best price available. Then you’d actually wind up paying more in a “hidden” way.
Well I guess it was too good to be true. The biggest disappointment for me is the inconsistency. First all trades were free. Then you have to have $2,500 in the account. And now it is $25,000. Before continuing to use Zecco I would have to make sure this is the final permutation of the free trade requirement. At this point I am starting to look into the Wells Fargo and Bank of America programs.
@ Ravi:
ALL those websites will do that if they can buy at a lower price than your limit order. especially if you are buying in small quantities. I’ve found that Zecco actually will help you get a better price occasionally–usually only by a few cents by sometimes have saved me a few dollars a share when I’ve had bad judgement on my part.
TDameritrade….will never =(. And they charge $10 a trade. Hope that helps you out.
I’m looking for some confirmation that I was screwed slightly. Let me know what you all think.
I recently placed an order at Scottrade for 25 shares with a limit order price of $100. However, I noticed that the cost of the trade turned out to be exactly $2500, so I was charged exactly $100.00 per share. I went to look at the chart that same day and it never got above $97.
Correct me if I’m wrong, but it looks like Scottrade managed to screw me out of $75 on a single trade. Limit orders should still try to get the best price like a market order, and just cancel the trade if that best price is above your limit price, right?
Cameron,
You should have gotten the market ASK price immediately whenever your BUY limit order is greater than the ask price. Any ethical broker would do that.
You got screwed, and should dispute the trade. It’s hard to believe Scottrade would do that; they are supposed to be one of the most reputable brokers.
I’m liquidating my acccount and closing it.
Zecco can also be looking to get rid of its least profitable customers since they do carry a risk by offering a margin account. Credit is getting tight and many companies are looking to focus on their most profitable customers. I’ll probably wait until the last day in hopes that the market goes up and close out my account with Zecco.
I have a regular brokerage and Roth IRA account with Zecco. I don’t like their new policy and I would like to leave. However, they have the gall to charge me $50 to do an ACAT out fee. The CEO said that these costs are passed on to their customers. What a class act! He will not even eat out the cost. He’s basically saying screw you if you leave we’ll charge you anyway. Now I can just sell everything and close the account but I can’t do that with an IRA. There is a closing fee or ACAT out fee of $30 and there is no way around it. Plus they already charged me the $30 maintenance fee for this year!! So they will get $60 from each customer who leaves.
If they announced this changed on their 2yr anniversary (October 2008), then I would have avoided their fees. I’m sure this was a calculated move so they can eek out every dime out of their customers.
STR8 FROM A FORMER CUSTOMER…ZECCO IS THE WORST…
Customer service, accounting methods, are all the worst in the business. I believe they might have even stolen some money from me. Regardless, with their free trade policy changing, there is no advantage to Zecco. I would not recommend anyone trading with them; take it from a former customer. They should go out of business.
Jonathan,
Have you tried Sogotrade yet? I’ve been looking for it’s reviews online, but couldn’t find anything from a trustworthy source..
Thanks,
SG
Zecco trading platform is crappy. Don’t recommend anyone to try them. They always have my buying power wrong. One day i logged in and see $6m in my account, which i wish i had and one day i logged in and see $1k which is completely off. In addition, Customer Services call center is the worst. You can never get through their line. Recommended SogoTrade and elsewhere.
Zecco has raised its brokerage commissions again. On Friday, February 25, the company announced that customers would no longer receive any free trades; Zecco raised its commission for $4.95 (from $4.60) and to $6.95 for shares trading under $1.