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Sunday, February 27, 2011

Zecco versus Schwab

DIY Investor has never used Zecco and has no clients who use Zecco, so he's running a bit blind in this post--sort of like Pacino driving the Ferrari blind in "Scent of a Woman."

Zecco had offered zero commission trades as noted by MoneyCone and now is charging $4.95/trade. Understandably, this has some people upset.

This would not be something that would affect DIY Investor because he minimizes trading and, in many instances with the likes of Schwab and Fidelity, uses commission-free trades. Still, DIY Investor wonders how Zecco stacks up against the likes of Schwab, so DIY Investor visited the Zecco site to see what was offered. DIY noted right off the bat plenty of resources for the trader - screeners, alert centers, "QuoteStream," etc. - the kind of tools that are definitely needed for jumping in and out. Zecco actually says "Markets move fast. You need the tools to move faster."  As an aside, this gets at the crux of differing investment philosophies. If you've ever played racketball, you understand that chasing the ball all over the court is futile and just wears you out. You need to understand that the ball mostly comes back to the center of the court, and a key is playing the angles and minimizing your movements.

So, definitely not DIY Investor's cup of tea. DIY Investor moves slow. In fact, as the years have gone by and experience has been gained, DIY Investor has moved ever slower.

What DIY Investor doesn't see at the site (and maybe they are there somewhere) are asset allocation tools, models to determine the appropriate risk tolerance structure for investors, or performance software that enables the investor to compare how they are performing compared to a benchmark  index. Is this the cost for low-priced trades?

Zecco clients must get analytics elsewhere, or maybe they are on the site but DIY Investor just didn't come across them. Or maybe clients watch CNBC and Cramer and sort of shoot from the hip. DIY Investor is going back to watch Pacino drive that Ferrari again.


  1. A very timely post Robert! For indexers and long term investors, this wouldn't matter much!

    Another lesson here is to go with brokers who have a good reputation and who have been there long enough and who will be there when you retire! I wrote about this point when I was researching a broker for my IRA and I remember not going with Zecco just for this reason even though their free trades were attractive at that time.

  2. @MoneyCone The reputation point is important. There is also the question of execution. I assumed both of these are fine.

  3. I like the Vanguard deal of no commissions to buy the Vanguard ETFs.

  4. @The Grouch No commissions makes it very easy to rebalance with ETFs.