Zecco, an online financial portal offering free stock trading, has just expanded its portfolio of products this week by offering zero commission IRA’s for your retirement savings.
Just as with the stock trading, Zecco puts certain limitations on your IRA account. Only your first 10 trades a day and first 40 trades a month are free and there is a $30 annual fee which is based on the charges coming from the clearing firm acting as a custodian for Zecco. As Jeroen Veth, Zecco’s CEO explains
While typical online brokerages can afford to absorb this cost and make it up in commission charges, Zecco Trading doesn’t have that luxury.
Zero commission may sit well with some but it doesn’t sound convincing for me. I usually don’t trade my IRA daily or even monthly and the maintenance fee of $30 sounds somewhat steep considering the fact that custodian fee for my current IRA account with a mutual fund is just about $10.
It should also be noted that the IRA accounts Zecco offers are not exactly mutual funds although they are just as diversified. They are based on ETF’s, or exchange-traded funds. These are similar to mutual funds in the sense that they are also combined of other companies’ stock but unlike mutual funds they are openly traded on stock exchange like stocks are. You can find more about pros and cons of EFT’s compared to mutual funds from this overview.
I wrote earlier about Zecco and Bank of America offering free online stock trading. As online technology advances and such heavy-lifters as Google step into the lucrative financial sector, online stock trading becomes more and more competitive niche to be. Brokerages keep reducing rates and I will not be surprised if one day my Firefox installation download cames with a free stock trading plug-in. ;-)
Most IRA’s have custodial fees; I just don’t trust a new site on the block to hold my money, that’s my main issue with Zecco.