New York, Elevating the price war to attract stock trading customers, Wells Fargo & Co. said Tuesday it will offer up to 100 free online trades a year to customers with at least $25,000 in balances at the No. 5 U.S. bank.
The San Francisco-based company made its announcement four months after Bank of America Corp (Charts)., the No. 2 bank, said it will let customers make up to 30 free online stock trades a month if they deposit at least $25,000.
Wells Fargo's brokerage arm is making it much easier to qualify for free trades than Bank of America, which started offering no-cost online stock trades to brokerage customers in some states last fall.
Most brokerages charge a fee to buy and sell no-load funds, except for funds on their no-transaction-fee platforms. These platforms generally include only those funds that pay the brokerage firms a fee and funds that are affiliated with the brokerage firm.
As stock-trading commissions have fallen, mutual fund transaction fees have remained high.
Fidelity generally charges $75 to buy or sell transaction-fee funds online. TD Ameritrade and Charles Schwab charge about $50, Vanguard and Muriel Siebert charge $35, E-Trade charges $20, and Scottrade charges $17. Even Zecco.com, a startup that offers 40 free online stock trades per month, charges $10 to trade transaction-fee funds.
On load funds, discount brokers typically charge investors the same commission they'd pay a broker or financial planner.
In June 2005, WellsTrade started offering customers with $250,000 in combined deposit and loan accounts 50 free stock or fund trades per year. It also reduced trading commissions on stocks and funds outside its no-fee platform to $2.95 for customers with $100,000 to $250,000 in Wells accounts and $9.95 for everyone else.
In October 2006, Banc of America Investment Services upped the ante by offering 30 free stock trades per month to customers with a total of $25,000 in insured accounts at the bank. That includes checking, savings and money market accounts and certificates of deposit. It does not include stocks, bonds, mutual funds or any type of loan. The free offer does not apply to funds.
With new offer, Wells makes it even easier to qualify for free trades.To get free trades, customers must link their brokerage account to a Portfolio Management Account, which includes a checking account. There is no fee for this account unless the customer's combined balances at Wells falls below $25,000, in which case it costs $25 a month.
Qualifying WellsTrade customers who make 100 free online trades within a year will pay $5.95 fee for each subsequent online trade. Each year, the free offer automatically renews. The offer of 100 free trades applies to each WellsTrade account. A customer can get more than 100 free trades a year by opening another WellsTrade account.
Jeff Cornman, Wells vice president of brokerage client solutions ,says,"This is our go-forward pricing. This is not a one-time offer."
Bank of America can offset the cost of free trades because customers must have $25,000 sitting in insured accounts, many of which are low-yielding.
But, at Wells, a customer could qualify for free trades with nothing more than a $250,000 mortgage. So how will it make money?
Cornman says,"We don't look at things in a single line of business approach. We look at the entire customer relationship. When we reward the relationship, clients are happier, they stay with us longer."
"When a customer brings more assets to us in their brokerage account, we do make money on those assets," he adds.