Displaying items by tag: etrade
Fidelity Cuts All Commissions (plus a Twist)
(New York)
It actually took longer than we expected. Last week there was a big splash in markets and media when Schwab, TDA, and E*Trade all cut their commissions in response to a first move by Schwab. Now, unsurprisingly—except for how long it took—Fidelity has followed suit. The unique part about Fidelity’s move is that in addition to free trades, it is also offering free money market funds for any cash left in accounts. Those are currently 1.58%, and way ahead of the near zero yield you get on cash at Schwab, TDA, and E*Trade.
FINSUM: The whole market has gone to zero on trading commissions. One wonders if the same is going to happen on large ETFs.
Schwab and TDA Cut All Trading Fees
(New York)
Charles Schwab may have just changed market access forever. The giant custodian and broker-dealer just announced that it was eliminating all trading commission on stocks, ETFs, and options. It is unclear if it is doing the same for advisors on its platform, but it said it would extend the offer to clients of RIAs who trade on its platforms. TD Ameritrade immediately matched Schwab’s offer within just a few hours. Following the announcements, brokerage stocks plunged. TDA fell about 26% and E*Trade fell 16% to new 52-week lows. Estimates are that the change in fees will depress both TDA and E*Trade’s earnings by 22%.
FINSUM: This is a game-changing move. Hopefully they will extend this to all trades for advisors. This is a brutally competitive landscape and retail investors and advisors are seeing the benefits.
Big Conflicts of Interest at Discount Brokerages
(New York)
The big discount brokerages might be poised for an ugly PR nightmare. In an expose type article, the WSJ has highlighted how big discount brokers like TD Ameritrade and Fidelity hide the fact that their account managers have conflicts of interest. Such managers often tell clients they don’t get paid on commission and therefore don’t have conflicts of interest. Yet in reality they do have incentive pay that biases their advice to steer clients into more expensive products. One former manager from Fidelity comments that “You’re omitting certain facts that the client would probably appreciate understanding before you launch into a sales pitch on why you think this product is better”.
FINSUM: This is definitely something that those who use discount brokerages should be aware of. It remains to be seen what the fallout from this expose might be.