A number of online brokerage firms have finally bucked the trend towards lower and lower commissions by launching new fees and raising prices – the inevitable effect of the steep decline in trades made online in the past several months.
In May, niche brokerage BUYandHOLD.com announced that it was implementing a $6.99 per month fee for each account, which would cover two trades (whether you made them or not) -- a big jump for many customers from the prior commission of $1.99 per trade.
Then TD Waterhouse announced that it was raising commissions 25 percent, from $12 to $14.95, for all but its richest and most active customers. To keep the $12 commission rate, clients must make 18 trades a quarter or have $500,000 in assets at the firm. In addition, in an effort to urge its customers to adopt electronic confirmations, the company announced that clients would have to pay $2.50 for each trade confirmation they were sent in the mail.
The latest casualties in the rising fee war are customers of Datek. Beginning September 30, customers who don't make four trades in six months or who don't have $5,000 in assets at the firm will be subject to a $15 quarterly "inactivity fee." Datek joins seven other major online brokerages in charging inactivity fees, including Schwab, Ameritrade, American Express, E*Trade, J.B. Oxford, Fidelity, and TD Waterhouse.
So what's a buy and hold investor to do? And what if you don't have a large enough account to avoid the fees? Fortunately, there are a few firms that still cater to smaller accounts or maintain lower (or even free) commissions that won't wipe out your portfolio each time you buy a stock. Here are a few places to start your search:
Look at their commission and fee schedules carefully before you open an account. And chances are good that your current brokerage will charge you as much as $75 for closing your account, but it can't hurt to ask them to waive the fee -- especially if you're moving your account because they've changed their fee and commission schedule.
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