I recently consolidated all my assets from various brokers to WellsTrade. I actually had 5 different brokers! Since trading in ETFs is a part of my investing strategy, I needed to pay close attention to trading costs. Each $7 I pay in trading commission could potentially mean $24 in 15 years! After researching various brokers, I picked WellsTrade. This is a detailed howto (probably the most comprehensive post on the web) on the account opening process with WellsTrade. And trust me, it wasn’t easy! It was confusing as hell, but then the bottom line was to save money and in the end I think it was worth it.
Who is this review for?
If you are looking to cut costs or are in the ‘researching a broker’ phase, this post is for you. I’ve been with Vanguard, Fidelity, OptionsHouse, Sharebuilder and Scottrade! I know the pros and cons of each broker. So use the comment form and ask me anything regarding any of these brokers. I promise I’ll reply!
Is WellsTrade right for you?
WellsTrade isn’t the only one offering free trades. WellsTrade isn’t for everyone either. If you don’t understand the fine print, WellsTrade can in fact prove to be a costly mistake. There are a number of gotchas you have to be aware of. Hopefully with this post, I’ll be able to clarify how this works. Here are some noteworthy brokers you might want to consider depending upon your situation.
Fidelity is a respectable broker. Their site is quite easy to use and they have great customer service. Fidelity currently offers 25 of their iShares ETF offering free of charge. They have a very well thought out mix of ETFs in their free offering. If you good asset allocation mix based on indexing, chances are that Fidelity has an ETF for you. Fidelity also has an excellent line of mutual funds if you are into managed funds. (Do check out my previous posts on Fidelity). The commissions otherwise are slightly above average. $7.95 per trade. Be aware though, Fidelity’s iShare ETFs have a higher expense ratio than a comparable Vanguard ETF. For example Fidelity’s EEM and Vanguard’s VWO both track the exact same index, yet Fidelity’s ER is 0.72 and Vanguard’s is just 0.27. If you invested $100,000, that’s $720 taken away as expenses compared to Vanguard’s $270. Fees over time add up.
Vanguard is well known for its low cost funds. Vanguard recently started offering all their ETFs free of charge if purchased directly from Vanguard which is awesome. But you need a minimum of $50,000 in Vanguard assets to qualify for this. If you are just starting out and have more than $50K and believe in indexing, you can’t go wrong with Vanguard.
Schwab is Fidelity’s nemesis! Both are neck to neck in competition! Schwab started offering commission-free trading of their ETFs, Fidelity did the same! Schwab reduced commission cost, Fidelity did the same. Schwab offers 2% Visa card, Fidelity offers 2% Amex card… you get the picture! Schwab’s ETFs expense ratio is in fact better than Vanguard’s but Schwab only has 8 ETFs in their offering as of this post. And all are relatively new. That is a cause for concern. Their commissions are higher than Fidelity’s at $8.95 per trade.
(I usually don’t write about products or services that I haven’t used myself without a disclaimer! So, disclaimer: I am not a Schwab customer. I may be able to give you my opinion of Schwab, but that won’t be first hand )
Then of course there are number of discount brokers offering low commission costs. I don’t have anything against them. They serve a purpose and depending upon your situation may make more sense to sign up with one of them. OptionsHouse offers all trades at $2.95 period. Not free, but a very good deal in my opinion.
So what does WellsTrade offer that is so attractive?
- 100 commission free trades per year for each account for any security be it ETFs or shares
- Over 1200 no load mutual funds free of any WellsTrade commissions
- If you have both an IRA and a regular trading account, you get 100 commission-free trades in each account
- Conversion of Vanguard mutual funds to corresponding ETFs free of charge
- Account maintenance and custodial fee waiver
All, provided you have $25,000 in combined assets with them.
How does one get 100 commission-free trades?
Now getting these 100 free trades is not a straight forward process. If it were, I wouldn’t be compelled to write this howto! Be prepared to sign and fax a ton of documents. There will be a lot of drumming-your-fingers-on-the-table moments, it will feel like 1990 all over again! See, Well Fargo isn’t entirely sold on the ‘electronic signature’ concept. But at least they didn’t ask me to come down to a branch to verify my identity!
Here’s how it works.
You open a WellsTrade account which is the brokerage arm of Wells Fargo bank
Fund it either with cash or via asset transfer from another brokerage with account balance of $25K. If you have a mortgage with Wells Fargo, you can use 10% towards this limit
Next sign up for their PMA package. PMA is basically a checking account.
Link your trading account with your PMA checking account.
Let’s get started.
Follow the instructions exactly in the order below to avoid unpleasant fees.
- STEP 1. Make sure you have assets worth $25K either in other brokerages, as cash or as a Wells Fargo mortgage (10%). If the assets are in other brokerages, you’ll need to transfer them over to WellsTrade.
- STEP 2. Go to http://www.wellstrade.com to open the WellsTrade account and complete and fax the account agreement form
- STEP 3. Either fund it with $25K cash or via ACAT transfer. These are two different forms. You have to either mail or fax them. Whether you fund it with cash or ACAT, you’ll still need to provide a bank account to link your brokerage to the bank account. You can link your external bank account via this form
- STEP 4. Once you get your account number in mail (not email, snail mail!), use that to get online access to WellsTrade
- STEP 5. Using the account number, get online access to WellsTrade
- STEP 6. Sign up for electronic access to shareholder documents and statements. Thankfully that can be done online!
- STEP 7. Wait till your money or assets show up. ACAT transfers take about a week to 10 days depending upon your other broker. IRAs take even longer.
- STEP 8: Once all assets worth 25K or more are in, start your PMA application. Do not trade yet
- STEP 9: Goto https://www.wellsfargo.com/checking/pma/index to open your PMA checking account
- STEP 10: You’ll have to fund it with $100 minimum (can use cc)
- STEP 11: Takes a couple of days for your account to be approved. Someone from Wells Fargo will contact you and will let you know.
- STEP 12: Confirm that you can see this account when you login to your Wells Trade account
- STEP 13: Wait for the PMA package to arrive in mail. Sign and mail in your PMA Consumer Account Application form. (I’m not sure if this can be emailed as well. Wells Fargo treats WellsTrade as a separate entity. PMA checking belongs to the banking side. Best to just mail it)
- STEP 14: Use this application form and link your Wells Trade to your PMA checking. You can email this to WellsTrade. Once that is approved, you’ll see two linked banks to your WellsTrade account. One should be your external bank account and another your PMA checking account.
- STEP 15: Move out the $100 from your PMA checking to your WellsTrade brokerage
- STEP 16: Move the $100 from your brokerage to your external bank account
- STEP 17: Verify your PMA is truly linked to your brokerage. To test this, enter a trade and in the preview screen verify that the commission reads $0.00.
- STEP 18: Await your PMA checking checks and debit card
- STEP 19: If you want an IRA with WellsTrade, rinse, repeat steps 1 through 7.
- STEP 20: Now you are ready to trade commission-free! Well, at least the first hundred trades…
MoneyCone TIP: The minimum to open a WellsTrade account is $1000 or an asset transfer worth $1000 or more but not necessarily both. Due to a quirk in the website, it’ll seem as though you have to do both. Don’t. If you are doing an ACAT, simply enter $1000 in the field but you don’t have to transfer $1000 via cash as well.
MoneyCone TIP: Though not advertised by WellsTrade you can also email your signed, scanned forms. Call WellsTrade to get the email address
MoneyCone TIP: If you call WellsTrade within a day or two, they’ll tell you your account number over the phone. You don’t have to wait for a week to get online access
MoneyCone TIP: If you are doing an ACAT transfer, WellsTrade also transfers the cost basis info. But this doesn’t show up immediately. The assets show up, but takes a little longer for the cost basis to show up. But in the meantime, do not enter the cost basis manually. Cost basis info is supplied only if the transferring broker provides it though. For me Fidelity did supply the cost basis. For Vanguard, Scottrade and OptionsHouse, I’m still waiting.
Moneycone TIP: Your IRA account after approval will not automatically show up. You have to add it via ‘Add Accounts For Online Access’ link on the left bar
DISCLAIMER:I don’t work for Wells Fargo. Please verify the information provided here with WF before acting upon it.
Walkthrough of account opening process at WellsTrade
Click to go to next slide
To give you an idea as to how exhausting just preparing for this post was, it took me about a week to simply re trace the steps of the account opening process at WellsTrade. I think it is needlessly complicated. But, having said that, the trading experience with WellsTrade is quite pleasant actually. Something liberating about trading, knowing you don’t have to pay a penny in commissions!