I try to keep a majority of my posts related to my own personal experiences, so when I decided to transfer my parents brick & mortar brokerage account to an online house, I figured it would be great to discuss my experience and reasoning behind it. It’s no secret that there are many people out there underfunded when it comes to retirement, and quite honestly my parents are no exception. They don’t live beyond their means in the least, but they also are not finance saavy people, so I felt that I should give them a hand in bolstering their retirement nest egg.
My parents have had an account with Edward Jones since I was a child, in fact, it was their investments with them that paid my way through undergrad. They had a long standing relationship with the broker there, and trusted him a great deal. Let me just say that the employees at Edward Jones always seemed professional, thorough, and courteous. However, when reviewing their annual account statement I noticed something I wasn’t especially fond of, a large amount of fees!
My parents have both a traditional and roth IRA. Each of those accounts garnered $40 in annual account maintenance fees, that’s $80 a year just for maintaining those account. Next, I saw that they had a $110 charge for a recent stock purchase. As someone who pays far less for such a transaction, I was literally shocked to see this. Edward Jones charged them $50 plus a $5 transaction fee for selling one stock, and then another helping of that same amount to buy another stock. A $110 for such a simple and straightforward transaction just seems egregious. The fees continue, as I also saw a purchase of a mutual fund in 2010 that resulted in a 5.52% transaction fee, or $43.69. One thing I liked about Edward Jones is that they allow the purchase of fractional shares through dividend reinvestment, though as you can guess, this brings even more fees they charge you. When all was said and done, after annual fees, DRIP fees, and trading fees, their gains were being eaten away each year.
I currently use Firstrade as my online brokerage account, I think they are great, and have had no issues thus far. However, online brokerages offer special account transfer deals all the time, and I wanted to choose the one that worked best for my parents right now. Optionshouse is currently running an ACAT transfer rebate promotion in which they will refund up to $100 for each account you transfer over to them, up to two accounts (each account needs to have a balance of $3,000 or more). Well this was perfect since my parents had two IRA accounts that needed transferring. I filled out two simple online account forms, printed them, and mailed them in. Within a week both accounts had been safely transferred over and the account transfer fees charged by Edward Jones had been refunded ($190 in total transfer fees!). The process was easy and they couldn’t be happier.
My parents are very simple investors, and purchasing options are not within their realm of investing. Regardless, Optionshouse is the place for them, as a typical stock transaction will now only cost them $3.95 as opposed to the $55 they had previously paid. They no longer will incur account maintenance fees, nor will they be charged for reinvesting dividends. In a relatively inactive year they stand to save hundreds of dollars, and in a more active year I would estimate they could save $1,000 or more in miscellaneous fees. That is significant considering the power of compounding returns they will earn on those savings in the future. It is nice to have a live broker to speak with, and convenient brick & mortar locations to visit. Though Optionshouse has an easy to follow online platform that they can check 24 hours a day, 7 days a week. They no longer have to wait for a monthly, quarterly, or annual statement to see the return on their investment. The Optionshouse platform will allow you to see the daily fluctuations within your investments if you desire.
I will admit that I felt bad transferring their money out of Edward Jones. It was a brokerage they had a long standing relationship with, filled with knowledgeable employees trying to make a living themselves. But I need to look into the best interest of my parents first and foremost, and at 56 and 60, they are very much nearing retirement age with little time to spare. Online brokerages have been around for quite some time, but I only see them becoming more prominent as the aging boomer population looks to cut corners and ramp up their retirment nest eggs in any way possible.