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Online Trade Savings for the Average Investor

Discounted commissions aren’t just for investors with million-dollar brokerage accounts anymore. Over the past year, many brokerage firms reduced the costs of investing, but the richest clients usually saw the biggest benefits. Thanks to a new relationship pricing approach, average investors are getting a chance to save money on trading costs as well.

Many firms offer discounts to average investors based on whether the trading is done online or in person, how much business you give to the brokers and several other factors.

For instance, Wells Fargo Investments, through its WellsTrade brokerage account for self-directed investors, now offers discounted trading commissions based on a customer’s combined brokerage and banking balance. The new commission schedule is made available to WellsTrade accounts that are linked to a portfolio management account, or PMA – which provides reduced fees and other benefits based on combined balances in checking and savings accounts, investments, IRAs, loans, credit cards and even mortgages.

“Currently, brokerage firms are focusing primarily on price reductions for high-asset clients and frequent traders of individual stocks,” said Rachel Perkel, senior vice president at Wells Fargo Investments. “The industry, for the most part, has shied away from providing great value to the long-term investor, particularly those interested in mutual funds. Wells Fargo Investments now offers customers the opportunity to qualify for some of the lowest commissions in the industry – regardless of brokerage assets and number of trades.”

By looking at a customer’s combined relationship, Wells Fargo Investments can provide lower commissions for those with smaller brokerage balances. Customers with a PMA will now be able to trade online for a flat per trade commission rate of $9.95, $2.95 or even commission free. For example, customers with PMA balances of $250,000 or more will receive 50 commission-free trades each year. These new low rates apply not only to online stock trades, but also to online mutual fund trades.

Other brokers may reserve their lowest commission rates for customers with brokerage assets of at least $500,000 or $1 million - not counting other assets and loans - or to very active traders.

Before you choose a broker – online or off – compare the charges for commissions and fees. Don't make your decision based on these figures alone. Also compare account maintenance fees, IRA custodial fees, and other costs and figure in the broker's reputation for customer service. With online investing it is often true that you get what you pay for, but the smart investor can still come out ahead.

As brokerage firms continue to make online trading easier, innovative accounts like these should help investors get treated like a millionaireeven if they aren’t.

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