Online Broker Consolidation, Banking, and Security
Last past week this series has taken us from introducing the big three online brokers to the factors most considered when choosing a broker and how they are or aren’t really all that important. I ended the last post by asking where brokers are going as an industry and what are the current trends now? These are important to us as traders because in the end we are the ones make the decision on who gets our business.
Consolidation
The big three brokers really have lead the wave of consolidation within the online broker arena. All three have made acquisitions if I am not mistaken over the last couple years. The biggest that I know of was the Ameritrade buyout of TD Waterhouse, forming TD Ameritrade which now has over 6 million clients (perhaps the largest out there). Etrade also wanted TD Waterhouse, but what was the big driving force behind the purchase?
Brokers Go Banking Bonkers
What is new around town? Banking, banking, and o ya, more banking. You can now have a checking account through the major brokers, take out loans, etc. You may or may not have noticed within the US, but you can now find Etrade ATM machines. Also, you can go to your local Scottrade branch office and talk with a home mortgage expert about taking out a loan. To answer the question from above Ameritrade bought TD Waterhouse to not only increase their client base, but also tap into this market. Before then, Ameritrade was nothing but an ant in the playing field.
So why does this matter when I choose my broker? Convenience really, because what the big three are doing is taking you as a client and giving you more. It isn’t just about their flat fee commissions they offer and free trading tools (real time quotes, screeners, etc.), it’s now also about helping you strategize your Roth IRA and getting you a home loan mortgage. AMTD and Etrade are both worth over $9 Billion dollars (market caps as of the close today). Some of the online brokers you may hear about on the net and think that $5 commissions (dont forget the ” * ” catch) can provide nothing close to what these guys offer. So, when choosing your online broker make sure not to cut yourself short, because service today goes way beyond $x* commissions.
Security is the Newest Trend
I first noticed this trend not even a few months ago when I signed into my Ameritrade Apex account to a nice, “we protect your security” message attached to the top of the screen. Protecting your account from fraud is apparently the latest concern to us traders. Take a look at Etrade’s website and you will notice that they have taken security to the max. Immediately when you hit their homepage you see a huge lock and message regarding security. And, it is quite impressive actually. I have seen their system in use, and I still can’t figure out how the technology actually works with the security key they give you. Your password is refreshed every minute, and this little gadget will read a fresh one off to you that you use to login to ur account; talk about high tech protection. Make sure you don’t loose your little password coder though (which is smaller than a pack of orbit gum), because it will cost you over $100 to replace (last time I checked), ouch…
Looking at security though overall, the more I see the “we protect you” messages, the more I feel better about keeping my account with my broker. I know that if my Ameritrade account ever gets frauded somehow, Ameritrade will refund me 100% no questions asked. But what about other smaller unkown brokers? If you are with a broker that doesn’t have a gaurantee, how comfortable are you with your kid’s college fund under their watch? This is something worth considering when choosing or keeping your online broker.
Summarize This Please!
Fair enough, here we go… Banking is the current trend of what major brokers want to provide to us as investors. Not only can we now trade with our broker, but we can now obtain a home mortgage and open a Roth-IRA. Take it one step further, and branch offices are opening across the globe under the big three and other select brokers. Also, next time you are at a mall, look at the atm machines and you may run into an Etrade machine, or next time you open a checking account, make sure to look at your broker, because they have that now too.
Secondly, account security is becoming a “gaurantee” from some of the biggest brokers around town. And, with technology only improving, I can’t see that as a bad thing. I feel good going to bed knowing my accounts are backed by Ameritrade’s 100% protection fraud system. Etrade is making it part of their niche, just don’t loose your portable password generator. I challange you to dig for information from your current broker. Next time you log into your broker’s account, see what security they gaurantee against fraud… you may be surprised at what you out…
Enjoyed this post? Subscribe to my Weekly Newsletter.
Discuss this post in the StockTradingToGo Forum.
Subscribe To StockTradingToGo.com
Comments on "Online Broker Consolidation, Banking, and Security" are closed.