Web Stock Services Alter Fees
For investors who use two rival online services for incremental stock purchases in the style of dividend reinvestment plans, the cost of doing business is changing.
New fee schedules and monthly subscription plans at BuyandHold Inc. and ShareBuilder, a service of Netstock Inc., amount to a cost hike for relatively inactive traders--but highly active investors probably will end up paying less.
“We’re not a not-for-profit,” said BuyandHold Chief Executive Peter E. Breen, whose firm scrapped its $3-per-transaction plan Friday in favor of two subscription plans. One is an all-inclusive version that costs $15 a month; the other is geared toward lighter traders and starts at $7 a month.
“A subscription or annuity service is the wave of the future in online trading,” Breen said.
ShareBuilder recently added an optional $8 monthly subscription that covers all purchases, while hiking its fee to $3 from $2 for single-stock purchases (for custodial accounts, the purchase fee went to $2 from $1).
At the same time, a $5 charge for one-time discretionary purchases was discarded and the fee for real-time purchases or sales was cut to $15.95 from $19.95 (standard ShareBuilder purchases are made weekly).
Both firms were launched in late 1999, touting DRIP-style investing for as little as $2 a trade, even in companies that don’t offer traditional dividend reinvestment plans.
DRIPs, which let individuals buy fractions of shares directly from a company at minimal cost, are aimed at small, long-term investors. The plans get their name because dividends usually are plowed back into more shares.
Both companies said Friday that their new pricing plans will help them get into the black.
“We’re gunning toward profitability in less than a year,” said Netstock Marketing Director Brandon Potter, whose Bellevue, Wash.-based company has more than 200,000 customers. ShareBuilder’s new plan has generated “only a handful of complaints,” Potter said.
Charles Carlson, editor of the DRIP Investor newsletter and a BuyandHold board member, said he has “taken a few hits” over the new pricing schedule since it was announced a month ago. Along with the $3 transaction fee, BuyandHold was offering automatic purchases for $2 apiece.
“Venture investors are becoming more demanding and increasingly impatient in funding business models that require time to come to fruition,” Carlson wrote in his June newsletter.
Under BuyandHold’s new structure, investors under its “basic” plan are docked $6.99 a month and their first two trades are included. Additional trades cost $2.99. Under its “unlimited” plan, a $14.99 fee covers everything. BuyandHold makes purchases in three “daily trading windows” rather than weekly.
Breen said he expects New York-based BuyandHold to become profitable in the first quarter of 2002. His firm has about 135,000 “active and funded accounts” after losing “only about 7,500 relatively inactive customers” in the last month, he said.
