Quirk says the brokerage business will continue to be dynamic, but warns against a price war that takes all participants to the bottom. “We had the benefits of a rising-rate environment, the competitive environment, and our integration planning for Scottrade to consider.” Scottrade, which TD recently purchased, charges $7 for a stock trade, so TD’s new pricing is in line with that of its acquisition. “While we have made a point not to get involved in past price wars, in this case, the time was right,” says Steven Quirk, the firm’s executive vice president of trading. But when its biggest competitors slashed fees to $4.95, TD had to respond.
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TD Ameritrade said as recently as mid-February that it had no plans to cut fees. The firm appears to have started the process of lowering its fees months before the launch of tastyworks. It is, rather, a large ship-and it can take time to change headings. Schwab, one of the largest online brokers, both by assets under management and by number of clients, isn’t a nimble little sailboat that reacts to every passing breeze. Closing a position is free.Īs much as we admire tastyworks, it seems unlikely that a small newcomer could cause such an upheaval. Tastyworks charges a commission only for opening a position-$5 for equities and $1 per contract for options. His acolytes believe that the launch of tastyworks, with its innovative fee structure, was the first salvo in the price war. The increase leads to higher margin-interest rates and higher rates of return on cash held in customer accounts.Īs we’ve written about price-cutting, we’ve received emails from fans of tastyworks, a new online brokerage launched in January by the founder of thinkorswim, Tom Sosnoff. The rise in interest rates-demonstrated by the Federal Reserve once more last week-can help bolster the bottom lines of the brokers that have cut their commissions.
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Margin rates rose this year for almost every broker. Fidelity and TD Ameritrade both edged up a fraction. Schwab achieved the biggest bump in its Cost rating from 2016 to 2017, going to 2.2 points from 0.9 points. We also take margin rates and other charges into account, and they can affect a broker’s score. The points awarded there are based on the range from cheapest to most expensive, with the least-expensive brokers earning more points. Barron’s encourages investors to look at the entire set of services a broker provides, including research and education offerings, and then decide whether the commissions assessed provide adequate value.Ĭost is an element in our rankings, and the six brokers who changed their pricing all earned more points in that category this year. “But cost is just one piece of the puzzle,” as Metzger says. Barron’s own reader survey shows that the majority of respondents want to keep their costs at a bare minimum. When Schwab surveyed its clients recently, more than 70% said that cost is a critical component in investing and financial-advice decisions. “We know that costs matter to investors,” says Barry Metzger, a senior vice president in Schwab’s Trading Services unit. And our 2017 winner of Best Online Brokers, Fidelity Investments, also joined in: The firm dropped its commission rate in two steps to $4.95 from $7.95. TradeStation announced that it is waiving its $99 monthly platform fee for its sophisticated analysis and trading engine, and also added a flat $5-per-trade charge to its elaborate fee schedule. E*Trade charges active traders-those who trade more than 30 times per quarter-$4.95 per transaction.
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TD Ameritrade and E*Trade dropped to $6.95 from $9.99. Following a second cut, Schwab now charges $4.95 per equity trade, as does Firstrade. Charles Schwab kicked off the price wars by cutting its base commission from $8.95 to $6.95, and after a flurry of activity, six brokers settled into reduced-fee structures. That means more of the market’s gains are ending up in the pockets of self-directed online traders. At the 16 brokers we reviewed this year, the average monthly cost of trading for an occasional investor had fallen 25% since early 2016, to $47.51 from $63.45. In the run-up to our 22nd annual ranking of Barron’s Best Online Brokers, two developments topped all others: The three major indexes-the Dow Jones Industrial Average, the Standard & Poor’s 500, and the Nasdaq Composite-all set record highs, and six brokers slashed commissions and other fees. «The bull market is on sale for online brokerage customers.