JPMorgan To Offer Free Trading for Bank Customers -- Update
22 August 2018 - 6:10AM
Dow Jones News
By Emily Glazer and Lisa Beilfuss
JPMorgan Chase & Co. is boosting its online investing
service with free trades for customers, a move that sent the world
of online brokerages into disarray on Tuesday.
The bank is trying to bring in more first-time investors, like
millennials, as well as bank customers who invest elsewhere.
JPMorgan's move could accelerate the pricing war buffeting rivals
like TD Ameritrade Holding Corp. and Charles Schwab Corp., which
have already been cutting fees in a fierce competition for
customers. Fintech startups offering low-fee or discounted trading
have only accelerated the competition.
Shares of TD Ameritrade, Schwab and E*Trade Financial Corp.
tumbled on the news, with TD Ameritrade falling more than 7% in
afternoon trading.
The JPMorgan service will offer any bank customer at least 100
free stock or exchange-traded fund trades for one year, with no
account minimums, said bank spokesman Darin Oduyoye. The free
trades are a sea change in the bank's pricing. It had charged
$24.95 for online trades as recently as last year, according to
CNBC, which reported the news earlier.
Certain wealthier bank customers will be eligible for unlimited
free trading, Mr. Oduyoye said. The service, dubbed You Invest
Trade, will be embedded in the bank's app and website.
Charles Schwab charges $4.95 per trade, and TD Ameritrade and
E*Trade Financial Corp. both charge $6.95 per trade, according to
their websites. Bank of America Corp. launched Merrill Edge, its
lower-cost online brokerage platform, in 2010. It costs $6.95 a
trade, with certain trades free for clients with balances of at
least $20,000.
Firms offer trading discounts to bring in customers who
sometimes become more lucrative clients if they take advantage of
other services ranging from investment advice to margin loans.
"There's a lot of competition now to get people on their
platforms," said Denise Valentine, an analyst at research firm Aite
Group who focuses on wealth management. "It captures their
attention and once you hook them, you have the opportunity to keep
them."
If JPMorgan customers exceed 100 free trades a year, they'll be
charged $2.95 per trade.
Schwab said in a statement it "will continue to aggressively
lead the way in improving how people invest and manage their
wealth." A TD Ameritrade spokeswoman said in a statement the
company "continually evaluates its offerings and pricing." "The
competitive environment will likely continue to shift, and we will
remain nimble," she said.
Schwab, the biggest e-broker, reported 11.2 million active
brokerage accounts at the end of the second quarter and said
clients executed an average of 704,000 trades a day. That amounts
to roughly 45 million trades and an average of about four trades
per client account during the quarter or 16 for the year.
Schwab and TD Ameritrade have seen lower revenue per trade as
pricing pressure heats up. At Schwab, average revenue per revenue
trade (which excludes certain transactions) fell to $7.30 in the
latest quarter from $7.96 a year earlier. For TD Ameritrade, that
metric dropped to $7.40 from $7.83 in last year's quarter. But
lower prices have been offset by higher activity, with both firms
posting solid increases in overall revenue.
After sitting out most of the nine-year bull run, more
individual investors started pouring in at the end of last year.
Schwab, TD Ameritrade and other online brokerages reported surges
in trading activity that carried into 2018, and they attributed
much of the activity to individual investors who opened brokerage
accounts for the first time.
JPMorgan also plans to launch a type of robo-investing service
embedded in its app and website called You Invest Portfolios to
assist customers with investing.
The products have been in the works for some time. At a June
2016 investor presentation, CEO James Dimon said he was considering
no-cost brokerage trades or a free automated investing program.
At JPMorgan's annual investor day presentation in February, Ms.
Lake said the bank offers an online trading service to wealth
management clients and would launch with other customers this
summer. Ms. Lake said that less than 10% of the retail bank's
customers have investments with JPMorgan, and that a two-year-old
$300 million investment into digital capabilities "will accelerate
our ability to capture more of their investments."
Write to Emily Glazer at emily.glazer@wsj.com and Lisa Beilfuss
at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
August 21, 2018 15:55 ET (19:55 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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