Full Disclosure Finance

By Andrew

So as you may know I recently relocated from Canada to the US for a new job. In the process I was advised to liquidate my equity positions in my Canadian bank account for tax purposes (don’t want the Canadian tax man trying to get a piece of my US income). Now that I’m settled in the US and I’ve got a bit of money to invest thanks to my international relocation package (that drive across the boarder was quite the financial burden), its time to look into opening an online brokerage. Since I’m just starting to put money into an investment account, the following factors are important to my decision:

1) Low transaction fees. If I’m dealing with smaller transactions I don’t want to be minimizing my return by paying huge transaction fees. My Canadian account had $30 fees each way (buying and selling). That means that you have to return $60 before you even brake even and that’s if you only buy once. The smart way to invest is work your way into a position slowly and add to it as the price increases (hopefully) and $30 fees makes it very tough to do this.

2) Good trading tools and user interface. I want to make sure the interface is easy to navigate and that trades are easy to execute.

3) Low minimum account balance and no damn hidden fees. Some accounts you need to have a billion dollar balance to get the best commission rates and have all these hidden fees. I hate hidden fees. Why not just tell me what I have to pay up front? There’s nothing worst than thinking you’re paying one rate and then realizing that its actually much higher.

So there is my search criteria. Lets see how some of the most popular online brokers stack up.

E*Trade Financial. E*Trade is probably the best known online broker. So naturally its the first site that I went to when I started doing research. Unfortunately E*Trade is quite expensive in terms of fees and commissions. If have less than $50,000 in your account and make less than 30 trades per quarter, which is pretty typical for the casual investor, you pay $13 a trade for stocks (same for options plus $0.75 per contract). You also have to pay $40 each quarter that you don’t make any trades on your account (subject to a bunch of other conditions). So although they have a awesome user interface and great stock ideas based on technicals and fundamentals, the cost for me is just to high. Plus their stock is in the dumps and they’ve got some serious management issues which can’t be good for the customer.

TD Ameritrade. The guy from Law and Order can’t be wrong can he? Actually TD Ameritrade seems like a pretty solid option. They have flat rate $9.99 commission for stock and option trades (+ $0.75 per option contract), no maintenance fees or minimum account balance. Here’s a chart of how TD Ameritrade stacks up against some of the other sites. They offer a load of account features, most of which are included with any level of account. So TD Ameritrade gets my thumbs up.

Scottrade. Scottrade was recently earned the JD Power and Associates award for “Highest in Investor Satisfaction With Online Investing Services.” They were ranked highest in investor satisfaction in a study that looked at information resources, cost, trade execution and Web site capability. Commissions are a flat $7 for stock and option trades (+ $1.25 per option contract). You get free streaming quotes, real-time account updates and wireless trading. The minimum to open an account is $500 and there aren’t any account maintenance fees. They have 326 brick and mortar branch offices nation wide creating a low cost/high service option. Thumbs up from me.

While Scottrade and TD Ameritrade both seem like very good options, they finished a close second in my decision. In the end I decided to go with Bank of America’s new Online Investing. I decided on Bank of America for a couple reasons. First of all, I do my banking at Bank of America, which means that I can manage all my money online in one place. I don’t have to worry about having money scattered over a number of institutions. Also, Bank of America gives you 30 commission free online equity trades per month for customers with at least $25,000 in their Bank of America accounts. They also wave the $50 semi-annual account maintenance fee for customers who bank at Bank of America. They have a number of investment and analysis tools available and there doesn’t seem to be an account minimum. So for the ability to have all my money in one place and for the $0 commission rates, I have decided to go with Bank of America Online Investing. Once I become familiar with the tools and interface I will let you know how the site performs.

Here are a few other options that seemed interesting but I couldn’t find enough info on.

Zecco. 10 free online equity trades with accounts of at least $2,500 and only $4.50 options trades plus $0.5 per contract. I couldn’t find any opinions online from people who had used the site.

Two other sites that seem to be fairly popular are OptionsXpress and TradeKing.

If anyone out there has some online broker experiences they would like to share (good or bad) feel free to leave a comment.