TowerGroup research has found that the actions of Bank of America and Zecco.com will put additional pressure on commission pricing across the brokerage landscape. Zero commission stock trading saw new life this October when Bank of America and Zecco.com both announced that they would begin offering clients zero commissions on stock trades.
This latest round in the zero commission game comes from two distinctly different firms. On 4 October Zecco.com announced that for a minimum deposit of USD2,500 a customer can open an account and receive up to 40 free trades a month, with up to 10 trades occurring on any given trading day of that month. Just seven days later, Bank of America announced that clients with USD25,000 or more in combined deposit accounts will be eligible for up to 30 free online equity trades per month.
According to TowerGroup, these new zero commission offers underscore that the name of the game is assets under management, representing a significant shift which has already transformed the traditional broker-dealer community from a transaction-based model to a fee-based one. While online brokers have traditionally compared themselves by number of active accounts on the books and DARTS (daily average revenue trades), Zecco.com is helping put the first nail in the coffin for this model as the industry’s pendulum swings away from traditional self-service investing. Bank of America, meanwhile, seems most intent on increasing its share of customers’ wallet and its retention of existing deposits – as opposed to gathering new assets through zero commissions pricing.
The new TowerGroup research report titled, “Zero Commissions in Online Brokerage: Rounds Two and Three,” by Matt Bienfang, a Research Director in the Brokerage and Wealth Management practice at TowerGroup, examines the impact this new round of zero commission offers is likely to have on both the industry and the individual investor.