Zecco put an end to their free trades last week enraging a lot of users in the bargain. Zecco was a relatively new entrant to the highly competitive discount broker space and had a number of users switch to their system due to their hard-to-beat offering of unlimited free trades with a minimum balance of $2,500.
The founders were so confident of this business model that they named the company Zecco, which stands for Zero Commission Cost.
But this was short lived and Zecco announced in Feb of 2009 that they are increasing the minimum requirement ten fold to $25,000 with 10 free trades a month instead of unlimited free trades. Of course, their discussion boards were seething with anger!
If you are a Zecco customer thinking of switching, here are some of your options:
- Wells Trade: For a similar deal, $25,000 in assets in Wells Fargo or Wells Trade you get 100 free trades a year. Now Wells Trade has been offering this for a long time and being a division of Wells Fargo, is highly respected. I’ve been with them for about a year now, and have no complaints. But the Wells Trade account opening process is a nightmare – still worth it for the free trades.
- Banc of Amercia has a similar deal too, not as flexible as WellsTrade, but I would never trust BofA with anything, leave alone my retirement money!
- If you are an indexer, Fidelity is the next best deal. Fidelity offers 25 iShares ETFs commission-free for its members. The ETFs are very well thought out and will work well for anyone with a good asset allocation mix.
- Schwab too offers commission-free trading of it’s ETFs. Schwab is relatively a new player in the ETF market and doesn’t have the variety as Fidelity, but still a good bargain since their costs(ER) are some of the lowest
- Vangaurd too started offering commission-free trades of it’s ETFs. For indexers this is an absolute boon! But Vanguard’s requirements are higher than Schwab or Fidelity’s
- OptionsHouse: They don’t offer free trades, but Options House does offer $3.95 trades, which in my opinion, is quite low. But Options House did increase their rate from $2.95 to $3.95 a couple of weeks back, so I’m not convinced this won’t go up. In their defense though, they are honoring the $2.95 rate for all existing members
As an investor, one should explore all options that can cut down costs. At the same time, you need to think long term as well. I went through the same dilemma when I wanted to open a Roth IRA last year. I even signed up for Zecco, but never transitioned to their system – simply because I wasn’t convinced Zecco would be there when I retire!
Except for Schwab and BofA, I’ve used all of the above brokers mentioned in this post and this is a reflection of my personal experience. The links above are my reviews of the various brokers I signed up with.