Word: schwab
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...Charles Schwab Corp. launched the opening shot when it chopped commissions on online equity trades by about 30% to $8.95 from $12.95 a pop for individual investors, and, more importantly, streamlined the fee so that it applied across the board regardless of how frequently someone trades, how many assets the investor holds, or how many shares a person buys. In the past, customers with more than $1 million in assets and those who completed more than 120 trades a year got the lower rate, while less wealthy, less active clients were hit with higher fees. Also, under the new rules...
...ball is now in TD Ameritrade's court, a firm that has been gaining market share in recent years, with its flat $9.99 fee. In 2009, TD Ameritrade's daily average revenue [producing] trades rose 17% while Schwab's fell 2%, said Michael Hecht, an analyst at JMP Securities, in a recent note. "We were the one shop that had simple, straightforward, transparent pricing - one price point for all clients and there's no gimmick to it," says Tomczyk. "Clients don't like it when think they have one price and wind up getting nickeled and dimed to death...
History has shown pricing can make a significant difference. In the 2004 price war, Schwab gained 5 percentage points of market share when it cut trading fees to $19.95 from...
...squeeze is already on at some firms. Schwab's lower commission announced in January, for example, will reduce revenue by $15 million to $20 million in the first quarter, and cut earnings by about 4 cents a share, or about 6%, in full year 2010, according to Richard Repetto, an analyst at Sandler O'Neill. Repetto estimates the company would need to see a 30% increase in daily average revenue trades to offset the lower pricing...
...that has been skewed by volatile markets)? A starting balance of $100,000 that was 60% stocks and 40% bonds in 1970 and was never rebalanced would have grown to $2.9 million by 2008. That same portfolio rebalanced annually would have grown to $3.5 million, according to the Schwab Center for Financial Research. Keep at least 25% of your stock allocation in foreign companies to hedge against a weak dollar and a lagging U.S. economy. Limit your Treasury securities to 10% of your bond holdings to hedge against a widely anticipated surge in government borrowing rates. (See 10 things...