What’s Next For Zecco Users

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!

Grr! © Martin Kingsley(via: Wylio)
Fast forward two years to today and Zecco, the Zero Commission Cost company is doing away with their zero commissions!

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.

If you intend to switch from Zecco, here’s a detailed step-by-step ACAT walkthrough on how to do so.

13 thoughts on “What’s Next For Zecco Users

  1. So, a really favorable price structre got people interested and active, but then the terms were changed. That would be quite annoying.

    Timely post, in that I’ve been looking for some low cost options anyway.

    What’s interesting is that another competitor raised rates but is honoring the prior rate for existing customers. To me, that seems like a smarter business practice and good way to avoid a negative perception online. I can respect that way of handling it. Always interesting how different people/organizations handle seemingly simlar problems in a different way.

  2. Zecco’s deal always amazed me, but decided not to go with them because of the ads that would play.

  3. I came across your WellsTrade setup guide several months ago and I didn’t know it would become useful until now. Zecco shafted every one of us and I’m sure they’ll lose their biggest accounts in a matter of months.

    My question though is does WellsTrade allow the trading of preferred securities? One of Zecco’s weak points was that sometimes it wasn’t able to pull up publicly listed preferreds, like C.Q. Sometimes it’s CpQ, C-Q, C-PQ etc. I wonder if it will let you enter an order for this security?

    • Glad you find the resource useful KS! On preferred securities, I entered C.Q in my WT account and it displayed details of C.Q – CITIGROUP CAPITAL XI 6% TRUPS DUE 9/27/34. So yes, WT does display publicly listed preferreds.

      So I’m assuming trading is allowed as well, since it took me to the trade screen. I’ve also emailed WT, I’ll update this once I get an official response.

      Hope this helps! If you have any more questions, just ask!

    • Good news KS! Got official confirmation from Wells Trade that you CAN hold and trade preferred stocks!

  4. Nothing stays free forever. I’m in the Vanguard program…. works well.

  5. I am currently using Wells Trade and that application process was a pain! Wow, didn’t know Zecco was for zero commission cost. You really dig into the details! :) Catchy name at the time, but whoops! Was it really bait and switch or just improper planning and underestimation of business expenses?

    • Thanks Buck! I don’t think Zecco’s original intention was bait-and-switch, but I would think they would’ve learnt their lesson after the first fiasco.

      Poor planning and forecasting is more like it.

  6. Lesson learned from not learning lessons? That’s a tongue twister! :) I wonder if there was a better solution. On the flip side, better to take a PR hit than go out of business, right?

    • I’d say, do what OptionsHouse did – honor the free trades for existing customers, new terms for new signups.

      “On the flip side, better to take a PR hit than go out of business, right?” You hit the nail on that one!

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