Considerations on Taking Up Free Stock Trade Offer
Posted by Frugal on February 19th, 2007
Similar deal as Bank of America, Wells Fargo is offering free trades for customers having $25,000 in bank accounts.
I know that $25,000 is probably a lot to keep in cash for many of you, but such offer is quite enticing for me. For the first time, I’m seriously considering consolidating all of my accounts at Bank of America or Wells Fargo. Between the two, I probably prefer Bank of America simply because it has more ATMs near my residence and everywhere else. In fact, this is one of the main reasons that I have not tried out Zecco.com, because I intend to take up the bank offer.
There are still many details that need to be researched and resolved:
- Can I move my stocks to cash or margin, in a margin account?
This is very important to me. I really like putting my stocks in cash so that no one else can be shorting against it, and increasing the phantom supplies of stocks by borrowing mine. On the other hand, I may have occasional need to move my stocks to margin so that I can temporarily obtain bigger buying power. I very seldom use margin anyway. In the last 10 years, I only get charged margin interests once, and it was because I was not aware that my “cash” was actually from shorted stocks which I could not be using if I don’t want to be charged margin interest.
- What’s the bank CD rate, especially 6 month and 1 year terms?
I normally like to keep about $5000 above the minimum limit before getting charged service fee in the bank. $25,000 is beyond my need. There will be about $20,000 idle cash after my consolidation. The best choice is putting them in CDs up to 1 year. If I do need extra trading cash from these $20,000, I can afford to pay some small trading fee for those period.
- Can I count the cash balance in brokerage account towards $25,000?
I believe at Wells Fargo, you can, but not at Bank of America. Having this feature is convenient for me so that I don’t need to transfer cash around between bank and stock accounts.
- What is the trading fee for mutual funds?
I have a small need for buying mutual funds. Some ETFs just don’t cover my need. Some of my gold funds are also sitting on a 100+% capital gain, and I would need to take a tax bite when I liquidate them for ETFs. Besides, the only ETF that I can swap into is GDX, and I prefer to keep a variety of ETF/funds in my portfolio instead of loading up in a single symbol. Possibly I will need to keep my gold funds separately in FirsTrade accounts where I can still trade without any fees.
- What is the trading fee for options & foreign stocks?
I have my foreign stocks currently in Scottrade account because the fee for foreign stocks is at least $30. Quite expensive, but still cheaper than most of the online stock brokerage.
The biggest hurdle obviously is getting my accounts all set up and paying all the transfer fees. I am using Izone, Scottrade, and FirsTrade currently for trading. If I do consolidate, I would still keep at least another one so that when one account goes down because of computer/network problems at the brokerage house, I can still trade from the other account. Maybe I could consolidate my bank accounts along with this move. Managing all these accounts and my relatives’ accounts is quite a big job.
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February 19th, 2007 at 7:58 am
What kind of foreign stocks do you buy?
February 19th, 2007 at 1:29 pm
Frugal,
You might recheck some things. BofA offers 30/month=360/yr, whereas the WF promo is 100/yr for th $25k.
You might check into BofA premier banking w/$100k deposit/investment requirement. we use to have a master relationship accout with BofA ($10k requirement). there are other levels for BofA private banking. WF has private banking for $1m requirement. Also checkout citi, chase, hsbc, too.
we found consolidating beneficial. you still can maintain high yield savings separately. you do get bennies with premium bank accounts. i was surprised that many of my friends who have enough savings/credit/investments and/or mortgage didn’t know about premium/private/platinum banking.
February 19th, 2007 at 3:07 pm
Tim,
I did look into BofA’s Master relationship account that does a daily sweep to a high yield MMA. I think the commission was $5. I though it was reasonable but haven’t taken the plunge yet.
You said you “used to ” have it. Did you find something better? My other issue is that I’m quite happy with TDAmeritrade which is where my main trading account is at.
February 19th, 2007 at 11:11 pm
If you rid your Firstrade a/c you won’t get access to zero fee no-load mutual fund trades
** $10 after Apr 2.
Does WF provide access to mutual funds?
February 20th, 2007 at 2:31 am
BofA’s offer is slightly different from WF’s. BofA requires 25K in deposit accounts (savings, checking, CDs) so that’s a lot of money. WF instead requires a 25K total balance that includes your brokerage and 10% of your mortgage balance. That means with WF, you can continue to keep your banking in high interest liquid accounts versus leaving money locked in with BofA’s rather uncompetitive rates.
The Firstrade deal — they USED to have free mutual fund transactions for ALL no loads. Now they are switching to free transactions for SOME funds — typically the funds charging high fees and giving a portion of those fees back to Firstrade.
WF is similar to Firstrade/Etrade/Schwab in that some high expense funds have no transaction fees. However, the 100 free trades per year cover funds that aren’t in this program. And at the 25K threshold, all transactions afterwards — whether stocks, ETFs or mutual funds not in their NTF list — are $5.95.
As far as I can tell, WF seems to have the best overall deal if you can meet the 25K threshold. Whether they will continue to offer this type of pricing for the longterm is unknown.
February 20th, 2007 at 3:09 pm
ML,
we had a Master Relations account, but switched to BofA’s Liberty Gold military banking, which requires $15k deposits to avoid monthly maint fee, but has much better benefits; however, doesn’t have trading options. I use USAA for trading since i pay $5.95/trade. I’m thinking of moving into their personal asset management account ($50k min), but i’m not feeling motivated to consolidate accounts for no real gain in benefits. I’m waiting for the two laddered cd’s (we keep the $15k required min in laddered cd’s that mature each year) in BofA to mature so we can move to a different premium/private/wealth management account. Looking at consolidating to something requiring around $75k-$100k min deposits starting jan 08 when cd’s mature. this opens up just about all the banks premium accounts. since we are saving for 20% down = $100k, this will be good when it comes time to get the $400k mortgage so we can switch to a higher level private banking requiring $500k-$1m combined deposits/investments/mortgage.
I’ve been researching private/premium/wealth management accounts on and off for the past year, but haven’t comitted to anything. I haven’t really seen any posts or blogs on the topic either. It seems that many PF bloggers have net worth’s that would make them eligible for premium banking accounts, but no one seems to own one. I have a year and a half (we aren’t planning on buying a house until then) to really decide which bank offers the best deal in terms of a complete package for trading, savings, cd rates, and checking.
if anyone has any experiences with these services, I’m all ears. most allow combined deposits along with mortgage, so i’d recommend folks to look into them.
I just read something about the BofA master relationship account (MRA). when we had the account it was $10k open and maintain. It seems that it requires $10k to open but you must have $25k min for the first year to avoid maint fee. After the first year, it jumps to $50k min to avoid maint fee. I also know, though, that the MRA stipulations can vary from BofA’s from state to state.
MossSF, the $25k with WF means that 10% of mortgage would have to be with them. This doesn’t bode well if you have a mortgage elsewhere. Really, then, this means that both WF and BofA require $25k and the BofA is better in terms of offering over 3 times more free trades. i agree that bofa rates are lower than other rates, but they aren’t that bad. but presumably you’d have the deposits in investments other than cd’s.
February 20th, 2007 at 8:44 pm
WF counts your brokerage dollar amounts towards the 25K. BofA does not. That allows me to transfer just my IRA over w/o having to move over my money market funds and online savings accounts also.
February 21st, 2007 at 12:13 pm
MossySF, simply not true. deposit accounts for BofA include savings, checking, ira’s, and cd’s https://www.baisidirect.com/index.html “…BAI adds the average collected balances in your checking and savings accounts as of the prior month to the balances in your CD and FDIC-insured IRA accounts as of the prior business day. If this calculation reflects a combined total of less than $25,000, BAI then makes a second calculation to see if the trade qualifies by adding the balances in your checking, savings, CD and FDIC-insured IRA accounts as of the prior business day…”
you can move your IRA to BofA and get 360/year free trades versus 100/yr for WF.
February 21st, 2007 at 1:48 pm
Tim, BofA specifies a “FDIC-insured IRA accounts”, which to me means an IRA holding a BofA bank CD. This does not include an IRA holding stocks or mutual funds.
I think most people should use an IRA to hold stocks and mutual funds, instead of a BofA CD.
February 22nd, 2007 at 4:27 pm
Sanjay,
I buy some junior mining stocks which are mostly Canadian foreign stocks.
February 22nd, 2007 at 4:30 pm
Tim,
Unless I can use the free trades for my custodial or retirement accounts, I can probably live with either 30/month or 100/year. If I do have more trades beyond that, I estimate that I probably won’t make more than 100 trades a year in accounts under my wife’s and my name.
February 22nd, 2007 at 4:36 pm
MossySF,
I just realized that FirsTrade doesn’t offer free mutual funds trades anymore, but at the cost of about $10 for non-loaded or non-NTF funds, which is still cheaper for most brokerage house. Thanks for bringing it up though. I will need to make a few corrections to my previous posts.
February 24th, 2007 at 12:03 pm
I just finished the paperwork to move my IRA and Roth IRA to Wells Fargo. While I was talking to the customer service rep, he mentioned I get 100 free trades per account even though the Roth IRA money is way below the 25K threshold (while my IRA is way above it). I doubt I will need that many trades anyways. 2-3 DCA transactions a month + a few stock picks here and there is probably what I’m looking at.
March 26th, 2007 at 9:00 pm
Frugal, a couple points.
As someone mentioned, but just to reiterate, the WF 25k balance includes all your accounts including brokerage holdings. So if you have 25k invested, you’re golden.
The free WF trades include mutual funds. BofA doesn’t the last I checked. Also, if you exceed the 100 free trades, additional trades are $5.95, again including mutual funds (so better deal than Firstrade)
April 3rd, 2007 at 1:47 am
Mla,
You are right. FirsTrade has changed their commissions since I recommended them about 1 year ago. I’m almost at the point of opening an account for WellsTrade. But market is too volatile now and diverting all of my attention.