Discount brokerages face a new threat: JPMorgan

Get ready for a shakeup in low-cost stock trading.JPMorgan Chase's decision to ...

Posted: Aug 24, 2018 3:53 PM
Updated: Aug 24, 2018 3:53 PM

Get ready for a shakeup in low-cost stock trading.

JPMorgan Chase's decision to get into the online brokerage business, offering 100 free trades in the first year, puts pressure on Charles Schwab, TD Ameritrade and E*Trade.

These companies already had to look out for startups such as Robinhood that offer free stock trading. The entrance of JPMorgan, the nation's largest bank, ups the ante. It could force more traditional brokerages to lower prices or find other ways to attract customers.

"This is a competitive threat," said Kyle Voigt, an analyst at Keefe, Bruyette & Woods.

JPMorgan had telegraphed plans to get into online trading for retail investors as it looks to strengthen relationships within its 60 million American customers. But market watchers were surprised by the bank's aggressive moves on price, Voigt said.

Schwab charges $4.95 per stock trade. TD Ameritrade and E*Trade charge $6.95.

After the first year, JPMorgan will charge $2.95 per trade. People with $15,000 in the bank will keep getting 100 free trades a year, and wealthier customers will have unlimited free trading.

"When it comes to retail brokerage commissions, the race to zero is over and consumers won," Nicholas Colas, cofounder of DataTrek Research, said in a report. "Expect to see major online brokers match JPMorgan's pricing structure soon."

The largest online brokerages, such as Schwab, could be first to lower prices, Voigt said. From there, others could follow suit.

Some details about JPMorgan's You Invest platform, such as how it will treat options trading, are still unclear. Brokerages likely won't move forward on price changes before they know exactly what they're up against.

"We will need to see the quality of the [JPMorgan] platform, particularly around options trading, to assess the true competitive threat to the ebrokers over the long-term, as these are typically their most active and profitable customers," Chris Allen, an analyst at Compass Point Research, said in a note to clients.

In the end, it's not all about price, Voigt noted. Customers also care about the quality of the technology and the availability of personalized investment advice, as well as the variety of trading choices.

"Price is just one tool they use to compete," he said. "But there's other things like service and product breadth that are very important."

Some online brokerages could stomach lowering prices better than others.

Schwab would be less exposed. It makes about 9% of its revenue from trading commissions, according to Allen's note. TD Ameritrade would be hit harder. Roughly 35% of its revenue comes from trades, Allen said.

These companies also make money on asset management fees, and earn interest on the cash balances customers leave in their brokerage accounts.

In a statement, TD Ameritrade said it is "very well positioned to compete and win in a low-cost environment."

"The competitive environment will likely continue to shift, and we will remain nimble," the company said. "We continually evaluate our offerings and pricing."

Schwab also expressed confidence.

"Other firms are now eager for a seat at the table, and when those moves help investors, that's good," spokesman Michael Cianfrocca said in a statement. "But Schwab will continue to aggressively lead the way in improving how people invest and manage their wealth."

E*Trade did not respond to a request for comment.

Mississippi Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 94021

Reported Deaths: 2846
CountyConfirmedDeaths
Hinds6979155
DeSoto542555
Harrison374372
Jackson339967
Madison321286
Rankin319375
Lee261067
Jones242778
Forrest239570
Washington218171
Lafayette209239
Lauderdale2007124
Bolivar179565
Oktibbeha175450
Lamar163534
Neshoba1540103
Panola144527
Sunflower142144
Lowndes140357
Warren138150
Leflore137080
Pontotoc123616
Pike121348
Monroe118965
Scott116425
Copiah116333
Coahoma112827
Holmes109258
Marshall107615
Lincoln106853
Grenada106235
Yazoo103929
Simpson101443
Union97824
Tate95537
Leake94037
Adams92136
Wayne87721
Pearl River86750
Marion84133
Prentiss81517
Covington80922
Alcorn77511
Itawamba77021
Newton75923
Tallahatchie75718
George75113
Winston72519
Tishomingo66137
Chickasaw65624
Tippah64516
Attala64125
Walthall59425
Clay58117
Hancock56421
Jasper55515
Noxubee54315
Clarke53739
Smith52414
Calhoun50612
Tunica48113
Montgomery45520
Claiborne45216
Lawrence42512
Yalobusha41814
Perry40918
Quitman3755
Humphreys37315
Stone35711
Greene34617
Webster33113
Jefferson Davis32811
Carroll31212
Amite31110
Wilkinson30217
Kemper28615
Sharkey26312
Jefferson2439
Benton2201
Franklin1893
Choctaw1795
Issaquena1033
Unassigned00

Alabama Coronavirus Cases

Confirmed Cases: 131988

Reported Deaths: 2304
CountyConfirmedDeaths
Jefferson19123337
Mobile13122290
Montgomery8688173
Madison763075
Tuscaloosa7323114
Lee575159
Shelby571950
Baldwin508749
Marshall387943
Calhoun337439
Etowah336547
Morgan321426
Houston272722
Elmore255847
DeKalb237119
St. Clair224335
Walker224380
Talladega207726
Limestone200119
Cullman186218
Dallas174926
Franklin174528
Russell17312
Autauga169124
Lauderdale165333
Colbert160926
Escambia156425
Blount156014
Jackson151611
Chilton150227
Dale133343
Covington131127
Coffee12838
Pike11619
Tallapoosa113683
Chambers113242
Clarke105517
Marion94828
Butler91138
Barbour8387
Winston71612
Marengo70119
Lowndes64927
Pickens63814
Bibb63610
Randolph62212
Hale61528
Lawrence59220
Bullock59114
Geneva5814
Monroe5768
Cherokee56916
Clay5527
Washington54913
Perry5386
Wilcox53111
Conecuh52411
Crenshaw52331
Macon47820
Henry4754
Fayette4269
Sumter41819
Lamar3532
Choctaw34512
Cleburne3326
Greene30015
Coosa1653
Out of AL00
Unassigned00
Tupelo
Overcast
66° wxIcon
Hi: 73° Lo: 62°
Feels Like: 66°
Columbus
Overcast
67° wxIcon
Hi: 74° Lo: 62°
Feels Like: 67°
Oxford
Broken Clouds
63° wxIcon
Hi: 71° Lo: 58°
Feels Like: 63°
Starkville
Overcast
64° wxIcon
Hi: 72° Lo: 60°
Feels Like: 64°
WTVA Radar
WTVA Temperatures
WTVA Severe Weather