With Commission-Free Trading Nearly Everywhere, Here’s What Investors Should Demand Now

In a matter of a few days, the brokerage industry went from charging customers for making trades to handing them out like candy at Halloween. Virtually every major online broker is now letting you trade stocks and ETFs without a fee. Many are also offering options trades without a base commission, though they do still require a per-contract fee, often around $0.65 a pop.

So with brokers ending the price war in a tie, what should consumers be looking for next from their broker? Bankrate spoke with several people across the industry to get their takes on how they see things shaping up in the near future.

Free trading is the new standard

Interactive Brokers kicked off the latest – and presumably last – round of price cuts in the race to zero commissions, launching its discount platform IBKR Lite. Days later, Charles Schwab announced they would stop charging commissions for stock and ETF trades, as did TD Ameritrade. Then in subsequent days nearly every other major player fell in line – E*Trade, Ally Invest and others came shortly thereafter.

Merrill, owned by Bank of America, joined the fray more recently, slashing its standard commission from $6.95 to $2.95. Members of Bank of America’s preferred rewards program now receive unlimited free trades, though they still pay a per-contract fee for options trades.

Fidelity Investments took a few days to fire its shot in the price war, and it showed why Fidelity was Bankrate’s selection for best overall broker. Not only did Fidelity slash its trading fees to zero, it also emphasized the company’s investor-friendly heritage and hinted at how other brokers would subsidize free trades — by selling their clients’ order flow to high-speed traders.

So Fidelity said that it would “automatically direct retail investors’ cash into higher yielding alternatives available for new brokerage and retirement accounts, and provide industry-leading best execution practices with zero payment for order flow for stock and ETF trades.”

“Up until the major players started announcing zero commission they decried payment for order flow as being against the customer’s best interests,” says Anthony Denier, CEO of Webull, a commission-free trading platform. “Now they embrace the practice — a very abrupt change.”

Fidelity explicitly called out this practice, and its moves are among the most investor-friendly in the industry, as it’s already anticipating the next front in the broker wars — around other services.

The next battle lines for brokers

Now that brokers won’t be competing on price, the battle lines are being redrawn. The industry will shift, and many changes are afoot, some of which will be beneficial to investors. Here’s what investors should be watching and demanding from their broker. While brokers may be introducing new services to compete, they may also be cutting other services you value.

“Think of telco operators back in the ‘90s, who all tripped over themselves to offer free long-distance calling when in reality it didn’t cost any more money to place a long-distance call versus a local call,” says Alan Grujic, CEO of All of Us, a new trading platform. “In a similar way, the time for extraneous fees in investing has ended.”