Free Trading, a Threat?

In October, Bank of America offered free trading to its banking clients with more than $25,000 in deposits. Just another shot fired in the online price war or something more?

In October, Bank of America offered free trading to its banking clients with more than $25,000 in deposits. Just another shot fired in the online price war or something more?

Brian Moynihan, president of global wealth and investment management for Bank of America says the move “represents a major step forward in the financial-services industry: [Bank of America] is the first, large-scale institution to take the cost of online trades to $0.” He called it “the final step in a multi-decade evolutionary process in the brokerage industry.”

But the move by the country’s second biggest bank could represent a longer-term threat to traditional brokers, too. Brad Hintz, an analyst with Sanford Bernstein, says that besides putting online rivals like E*Trade and Schwab on guard, the firm’s offer should send a signal to the likes of Merrill Lynch as well. “Say you’re in your late 20s, and you just got that $25,000 nut together,” he says. If you’ve got a Bank of America bank account—which is a distinct possibility given the bank’s 33 million customers—“why would you then go to

E*Trade or, for that matter, a Merrill call-center” to do your trading, asks Hintz. And Bank of America has brokers and advisors, too. Maybe that guy with $25,000 in his late 20s will end up being a multimillionaire in his 50s.

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