jdt@houxj.UUCP (J.TAIS) (12/09/85)
Time for me to put in my two cents worth. Let me say first that I don't think it should cost more than $35 each way to trade up to 300 shares of a $25 or less stock. There are literally dozens of discount brokers offering rate schedules like this with 800 numbers in New York and other cities. Half of these guys clear their orders through Q&R Clearing Corp. (Incidentally, I think it's true that Quick & Reilly is somewhat more expensive than other brokers which answer the 800 phone line and then process the trade through Q&R CC. I really love those commercials where they say you can get the Quick & Reilly "National Account Card" so you can access your account at any office coast to coast. I do this with my present broker. I walk to a pay phone.) From this evidence I draw the conclusion that the $35 adequately covers their costs plus a small profit. Thus, how do the rest of these guys justify the higher rates? Well, Schwab and Fidelity offer you the convenience of a network of branch offices. Fine. So I can take a day off from work and drive to the Schwab office to drop off my checks instead of mailing them. Great. Actually, I have a MAJOR PROBLEM with Schwab and Fidelity and the type of people they probably employ. I know lots of ticker symbols, but I don't like reading them over the phone because there's lots of potential for error. When I call my cheapie broker in NYC I just read them the name of the stock (say Apollo computer) and they give me a quote or place the order. With Schwab people, it's a real struggle saying "Apollo Computer - A-P-C-I - No, A as in Apple, P as in Paul, C as in Charlie, I as in Idiot" and you wind up with a quote on Apple computer. I just think they can't spend the money to attract the good people out of the city into their mostly suburban offices. Fidelity's the same, but they're even hitting up their mutual funds for 1-3% loads to pay for this, too. Walk on by. In addition, I think Schwab's rates are a ripoff, at least at the low end. To buy $2000 worth of stock costs $50 ($19 + 1.6%). To buy $4000 costs $68 ($44 + 0.6%) $6000 costs $80 ($44 + 0.6%). That's 300 shares at $20 for an $80 commission, versus $35 at a lot of brokers and $25 at Pacific Brokerage. Fidelity is basically the same. The only values offered by Schwab and Fidelity are the free IRA/Keoghs and Schwab 1/Fidelity USA type accounts. Schwab also offers a good touch tone quotation service (1st year free, $20/yr after that), but you still need human intervention to get current (not delayed) quotes and place orders. I can make up the $20 annual fee with the first trade switched from Schwab to another broker. Basically, you could say that I don't feel like paying for their branch offices or their extensive advertising, neither of which is of any use to me. I have no love for Rose, either, unless they've changed since I briefly used them. When I called them either the phones were busy or they put me on hold for five minutes. Forget it. Their commissions are no bargain either. The first 100 shares are $35, and it goes up from there. It was $75 for 300 shares before they jacked up their rates last year. Rose also offers a free touch tone quotation service with an 800 number, but there is a weekly usage limit and it is somewhat cheesier than Schwab's. OK, so who do I like? I say use one of the cheapies with a toll-free 800 number and $35 or less commissions at the low end. As soon as you buy any stock you have lost money until it goes up enough to recapture the commission. With these brokers the deck is stacked a little bit less against you. I can provide recommendations for the following brokers: 1. Pacific Brokerage: (800-223-3242; in NY 212-509-3880 or 800-522-5005) A good friend of mine does all his trading through them. He also works across the street from them in New York, goes over to use their Quotron, and says they have a nice customers' room. You can do 300 shares of any price stock for $25 (plus $1 postage--interesting). They also have excellent margin rates: Broker call for debit balance over $25K, plus one-half percent under $25K. They clear their own trades. They pay interest on credit balances at a reasonable rate, and offer IRA's through State Street Bank of Boston ($25 Setup, $25/year Maintenance). Options trades are real cheap, too. Bonds $4/bond. A basic, professional, good-value discount broker. 2. York Securities: (800-221-3154; in NY 212-425-6400) $35 Minimum commission. For a while you could get a free 10-week Value Line subscription with your first order. Don't know if this is still the case. Again, good basic brokerage service, and relatively cheap among the $35 brokers. A little more expensive than PBS, but you may feel more secure because they use Q&R as a clearing broker, so in fact your securities are held by a pretty well capitalized firm that everybody has heard of. You can put credit balances into Kemper money market, IRA offered (don't know terms), etc. Free copies of S&P Stock Reports. 3. Waterhouse Securities: (800-327-7500; in NY 212-344-7500 or 800-522-7500) $35 Minimum commission. Also clears through Q&R. Margin rates: Below $50K is broker call + 1%, above $50K is + 1/2%. When you sign on with them you get a package of investment and tax information, plus regular updates. You get an S&P stock guide, annual & midyear editions of S&P's Outlook, a Tax Guide, etc. I think they also give credits to your account for ordering certain publications like Barron's through them, which is a good deal if you realize that it is next to impossible to get Barron's at discount rates--the subscription is almost exactly equal to the cover price. The material I have from Waterhouse says you get a $20 credit for a $55 annual subscription. The current annual cost is $77, so obviously the brochure I have is out of date. Also, Waterhouse assigns you a "personal account executive", if you want the personal touch. The difference is that the Waterhouse guy is on salary, while your "personal account executive" at say Merrill gets 33% of your inflated commission dollars for giving you bum steers. (pun intended). Which is not to say that Waterhouse gives recommendations ( I do that ), just a guy who knows your voice. You can get free copies of S&P Stock Reports on request. I have dealt with or know people who have dealt with the above brokers, so I am pretty confident about the information presented here. Other pointless ramblings: - Olde & Company: Offers certain services of dubious value. (1) Round- trip commission: close out a position within 31 days and get 50% discount on closing transaction. I would STRONGLY recommend against letting such concerns get in the way of legitimate investment decision making. (2) First Trade free in IRA accounts: Sounds like a nice deal, but I read the fine print carefully--there is a $50 termination fee when you close/transfer the IRA. At best, you are deferring the commission into the future. (3) It seems at least half of the banks offering brokerage services are offering OLDE's services. - Full service brokers: (1) These companies are geared to SELL. They do not care whether or not you make money (except that if you make money it will enable them to bleed you dry over a longer period of time). (2) The account executive (salesman) gets about 33% of the commissions he generates from you. Thus, the stocks you own are always "losers" or "peaked out", and you should be selling them and buying into the firm's new recommendations. Typically, the firm's recommendation is (a) some stock they picked up a big block of, cheap, or (b) some company whose underwriting business they have gotten. Typically, this is called the "special of the day" on which the broker gets greater than the usual commission as an inducement to sell more. Also falling into this category are the load mutual funds, GNMA funds, etc. (3) Relative to Schwab, however, they may not be so bad. To trade 100 shares at 20 may cost around $75. After giving your broker his $25 cut, the remaining $50 for the house is about the same as Schwab charges you for making the decision yourself. So if you keep your broker on a tight leash and don't trust discounters this may be the way to go. (4) Somebody mentioned a purchase of 2 or 3 shares of PG&E stock, and how you'd need a 300% return to break even. Actually, this kind of trade is best done through a full-service broker since they don't have the $25/$35/$45 minimums that the discounters have--you might get out the door on such a <$100 trade with maybe a $15 or $20 commission. Also, the full- service houses' options commissions are fairly competitive with the discounters, and this is one area where having a full-time account rep keeping an eye out for you could be a real advantage. I think Shearson/AmExpress is the cheapest in this area. (5) As far as asset management accounts go, if you are spending $65/year on an AmExp Gold Card you might as well spend $100/yr on the Shearson asset mgmt. account w/free gold card (or get a Schwab 1 which is free plus offers you a free VISA debit card--but watch those rules on customer liability for lost debit cards--you could get cleaned out if you lose it and don't report it.) Sorry this has run on for so long, but I think the signal/noise is pretty high and hopefully this answers a lot of questions and allays a lot of fears about those ads run by the lower tier of discounters. I've been lucky not to have any horror stories lately; it just goes to show that, as in computer software, paying more does not necessarily buy you a better product. Market's up 11 at midday, UK +3 on takeover by GAF, which is +8. TX -5/8. --- "When in doubt, put it out" John Tais, AT&T Information Systems, Holmdel NJ ihnp4!houxj!jdt (201) 949-0230 HO 2H-212
marcos@sdchema.UUCP (David A. Pearlman) (12/12/85)
> somebody mentioned a purchase of 2 or 3 shares of PG&E stock, and how > you'd need a 300% return to break even. Actually, this trade is best > done through a full-service broker, since they don't have the > $25/35/45 minimums that discounters have... In theory, this is good advice. However, in practice... My experience has been that the non-discount brokers don't want anything to do with you if you're not willing to make some sort of "significant" trade to open your account. This is not a problem for me now, but about 9 years ago (I think), when I was younger (naturally) and had a lot less cash to invest the following happened to me: The father of a friend of mine had just taken control of a bankrupt concern (I think the name was Penn Pacific), and advised me that it'd be a good idea to get some of the stock if I had a little money to gamble (not "inside information", just a positive outlook). I had $500 I was willing to gamble, so I went down to my "friendly" neighborhood Merril Lynch office, where I was told that it wasn't policy to open accounts for such petty trades. I asked for a quote, and the broker I talked to said he couldn't find the stock listed. I asked if he had checked the pink sheets (which I didn't know much about at the time, but where my friend told me the stock was listed) and the broker mumbled something to the extent of "what ARE you talking about?" I timidly walked out and gave up (I know, my fault; but I was young, and all my resolve to make the plunge was broken by the snotty broker). At any rate, I forgot about the stock for a couple of years. Well, a couple of years later, I was talking to my friend whose father had taken over the company, and I asked how the stock was doing. I learned that it had gone up 5,000% from the time I had tried to buy it! No moral here. If *I* had been more persistent, I probably could have bought the stock. But the fact remains: these high-commission brokers can be real sh*ts when it comes to taking your money. I ran across the same thing at a different office of M. Lynch several years later, when I was interested in buying some 18% (or something like that) Pepsico 0-coupon bonds. When the broker found out how much I wanted to invest, he basically just hung up on me. Now I rely mostly on discount brokers: they may not be the cheapest on everything, but they'll take your money and they won't bother you if you want to make an off-beat investment (none of that "oh, I wouldn't do that if I were you because Bernie in the other office heard that Maggie over in corperate finance once had a friend who...; but I've got a good tip on Baldwin United at $65" crap). David ("Dr. DAP") Pearlman
hrs@homxb.UUCP (H.SILBIGER) (12/26/85)
When talking to your broker, think about this: If he/she really knew anything, would they be on the ohone trying to get your business? Herman Silbiger ihnp4!homxb!hrs
hollombe@ttidcc.UUCP (The Polymath) (01/08/86)
In article <1060@homxb.UUCP> hrs@homxb.UUCP (H.SILBIGER) writes: >When talking to your broker, think about this: > >If he/she really knew anything, would they be on the ohone >trying to get your business? Yes, because really good, top producing brokers can make over $800,000 a year in commissions with no downside risk to themselves. Of course, finding a broker that good is something else again, but they do exist. -_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_-_ The Polymath (aka: Jerry Hollombe) Citicorp(+)TTI 3100 Ocean Park Blvd. Geniuses are people so lazy they Santa Monica, CA 90405 do everything right the first time. (213) 450-9111, ext. 2483 {philabs,randvax,trwrb,vortex}!ttidca!ttidcc!hollombe
tjo@gypsy.UUCP (01/10/86)
<> Sometime within the past ~12 months, the New York Times had an article about these "super brokers". There were interviews with perhaps half a dozen of them, and useful facts such as "unless your portfolio is worth at least $N, don't bother trying to become a client." A lower bound for N is probably 250K, maybe 500K. tom ostrand