Why do so many brokers start to offer free trades?

[muscleman]

I am surprised to see this 500 free trades offer today from schwab.

https://www.schwab.com/public/schwab/active_trader/start_trading/500year_offer2.html

 

I know BoA offers a lot of free trades per month, and Chase started doing that as well. Robinhood is always free for all trades, and now Schwab joined the party as well?

 

It seems like getting more client's money so they can get more kick-backs from Citadel is the new way to do business.  ::)

 

Note that all these brokerage firms have close to 0 interest payment on the cash balance, which is probably another source of income for them.

At the same time, Fido pays 1.8% for idle cash if you choose "Government Obligation" as the cash sweep vehicle, while IBKR pays 1.7% on your idle cash.

[Liberty]

It's a form of CAC. Get them in, cross-sell them on other stuff, get the big customers to go over the limit or upgrade, gather assets now that rates aren't zero, etc.

 

But also increasing competition forcing lower fees, like in the indexing world (some ETFs now have zero fees if you buy them through certain brokers, etc).

[muscleman]

It's a form of CAC. Get them in, cross-sell them on other stuff, get the big customers to go over the limit or upgrade, gather assets now that rates aren't zero, etc.

 

But also increasing competition forcing lower fees, like in the indexing world (some ETFs now have zero fees if you buy them through certain brokers, etc).

 

Yeah. TDAM pushed hard to sell my margin account instead of cash account but I said no. They also call me almost every month to try to sell my some CDs until I said I am really upset and please don't call again on it. I plan to move back to IBKR next month. ::)

 

[NoCalledStrikes]

The brokers used to be able to offer frequent flyer points, Apple gift cards, and the like but those are now considered illegal inducements especially for retirement accounts, but providing free trades are not.  I used to just transfer the minimum dollars over to maximize my rewards. And i miss those free miles.

[stahleyp]

Plenty of firms still offer cash (though I haven't seen gift cards or airline miles). I do this and it's easy money (especially since I don't trade very often).

 

By the way TD Ameritrade is terrible. I tried doing a roth conversion and they did 4x the amount I wanted them to do.