Note: TradeKing and Zecco have announced a merger in the fall of 2012. The merger should take place over the next few months and the merged company will be under the TradeKing name. The functions and prices of these firms should remain the same, and they should be able to combine their assets for more advanced trading tools. Here is our full TradeKing review which covers the features offered at TradeKing.
Zecco Trading was one of the most popular online stock brokerages when they launched several years ago. They offered free stock trades, and thousands of new customers opened a new brokerage account with Zecco. But as the economy changed, so did Zecco Trading’s ability to offer free stock trades. They made their money by earning interest on the cash held in customer accounts. This was a good business plan when interest rates were hovering around 4 and 5%. But then the interest rates dropped to the 1% range, and Zecco could no longer offer free trades to everyone. They eventually limited the free trades to those who met certain requirements, such as a minimum account balance or number of trades per month. All other trades were still a reasonable $4.95 per trade, which was still low enough to rate among the industry leaders in price.
Why Zecco is so attractive
Zecco’s pricing structure is among the best on the industry. On top of Zecco’s pricing structure you have a fairly robust trading platform with free investing tools, an education platform, and a large community of Zecco users who share information and tutorials in forums and blogs within Zecco’s pages. There is a lot of value packed into an inexpensive stock trading platform. I wrote a review of Zecco.com that further explains some of the pros and cons of Zecco.com.
But is Zecco now the best option for discount brokerages? Even with all of the good things going for Zecco.com, the new pricing platform has leveled the playing field. TradeKing and ShareBuilder are now much more competitive in pricing when compared to Zecco. If you reference back to the Zecco review you will see that Zecco was able to offer free trades in part through premium features. Almost all of the features are available for free through TradeKing.
Comparing Zecco to TradeKing
I am going to use an example of a casual trader – someone who is using an online discount brokerage to make a few trades per month or systematically purchase ETFs or other equities. Unless you have $25,000 in your account or make 25 trades per month, then you will be paying full price for trades with Zecco.com. If you meet the free trade requirement, Zecco may still be the most cost effective option.
Zecco vs. TradeKing. Equity trades at Zecco and TradeKing are the same, both ringing in at $4.95. The difference comes with the extras – Zecco charges $50 a year for their GainsKeeper tool, which tracks your realized and unrealized gains – it’s a great tool for maximizing your tax strategy as you go. TradeKing features the Maxit Tax Manager which does the same thing, but is free. Zecco also boasts a host of other premium features, many of which require a subscription. Most of these aren’t very expensive for what you get, but similar tools can be found for free at places like TradeKing.
TradeKing will pay you to switch brokerages. On top of this, TradeKing will pay you up to $150 to move your brokerage account assets to your new TradeKing account. TradeKing also offers promotions and signup bonuses at least once per year. Here are more details about TradeKing’s asset transfer offer:
Why switch to TradeKing from Zecco? TradeKing offers all the features that Zecco offers, but doesn’t charge you extra for them. TradeKing has a robust trading platform, great community, and one of the best investment training resources on the web – all for free. Here is a full TradeKing review for more information.
Comparing Zecco to ShareBuilder
Making the same assumptions of a casual investor, here is how Zecco compares to ShareBuilder:
Zecco vs. ShareBuilder. ShareBuilder is another popular discount brokerage firm. ShareBuilder’s business model is to get their investors to systematically invest their money through automatic purchases. ShareBuilder wants you to build wealth through Dollar Cost Averaging and growing your shares through reinvesting dividends. ShareBuilder offers the option of purchasing partial shares and setting up automatic DRIPs (dividend reinvestments). You can do DRIPs with Zecco, however, you cannot purchase partial shares, which means you may have some loose change after every quarterly dividend payment. ShareBuilder uses every cent toward growing your wealth. Here is a full ShareBuilder review.
Cost of investing with ShareBuilder. ShareBuilder’s pricing structure is geared toward systematic investors. Scheduled purchases can be had for a little as $2-$4 each (based on number of scheduled purchases per month). Real time trades are $9.95. Like Zecco, ShareBuilder offers a few premium features which require a subscription. If you use Zecco for buying ETFs or other equities on a regular basis, you may find that ShareBuilder just became a more attractive option in terms of price.
Why switch to ShareBuilder from Zecco? ShareBuilder offers inexpensive trades to the systematic investor looking to grow their wealth through dollar cost averaging and dividend reinvesting. The ability to purchase and reinvest in partial shares is extremely attractive to dividend investors looking to maximize the growth of their dividend stocks. The pricing structure is also a very attractive alternative.
Zecco is still a great discount brokerage
I’m not saying you should leave Zecco – far from it. I believe they have a solid trading platform and an attractive pricing structure. But the playing field has been leveled and it is by their own doing. It never hurts to shop around – you may find a brokerage that is better suited for your needs.