Firstrade to Start Charging Fees for Mutual Fund Investments

I got this email from Firstrade today, but somehow the date of the message shows February 7, 2007. While the message began with an exciting tone by saying “We are pleased to announce that Firstrade now offers over 10,000 mutual funds,” What it really wants to tell me, as well as all other investors (existing or potential) who have invested or planed to invest with Firtrade, is not a piece of good news:

Starting on April 2, 2007, please be advised of the following changes to our mutual fund policy at Firstrade:

  • A $9.95 commission will now apply to No-Load mutual fund trades. This allows us to maintain the lowest mutual fund rate in the online brokerage industry.
  • No Transaction Fee (NTF) and Load funds will remain commission free.
  • The early redemption period has been decreased from 180 calendar days to 90 calendar days.

Though they still offer No Transaction Fee (NTF) funds, a quick check on what exactly are defined as NTFs shows the choices are very limited. For example, funds from popular fund families such as Dodge & Cox, T. R. Price, and Vanguard all now become No-Load mutual funds, meaning that investors have to pay $9.95 for every transaction. Actually, Firstrade now has 188 fund families in the No-Load category, while only 68 fund families belong to the NTF group.

More than four years ago, when Scottrade started to charge fees to some no-load mutual funds, Firstrade were mentioned by lot of investors as an alternative because of the fee-free mutual fund trading at Firstrade. Now, it seems this also comes to an end. If everybody else in the brokerage industry charges fees for mutual fund trading, we shouldn’t really be surprised to see Firstrade changes course. After all, we have to invest with somebody.

You can find out more about Firstrade in my Firstrade review post.

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4 Responses to “Firstrade to Start Charging Fees for Mutual Fund Investments”

  1. MossySF |  Feb 19, 2007 at 4:36 pm

    My current thinking is to switch to WellsFargo and get the 100 free trades a year (includes no load mutual funds not in their NTF programs). Should be enough for me to get by — until WF decides they need to increase fees. Then it’ll be another switcheroo to someplace else.

  2. The Sun |  Feb 19, 2007 at 10:40 pm

    I don’t know your trading strategy, but I myself don’t like switch brokerages despite that I am using quite a few right now. The WF promotion seems to be interesting, but they still have a minimum requirement of $25K to get the free trades. 100 free trades are a lot in one year (nearly two a week). This is good for stock/ETF trading, but not for mutual funds as mutual funds are supposed to be long term investments. Currently their real-time mutual fund trading has a fee of $35, which is very high compared with other discount brokerages. If you decide to take this promotion offer, what do you want to after one year? Keep you account with them? Or transfer the account out? For me, Getting 100 free trades doesn’t warrant a long-term relationship with them.

  3. MossySF |  Feb 20, 2007 at 1:30 am

    My current IRA balance at E-Trade is easily enough to meet the 25K limit for the 100 free transactions per year. Mutual fund transactions are covered as part of the freebies. Meeting the 25K requirement also drops all transactions afterwards to only $5.95 whether it’s stock, ETFs or mutual funds. This would let me DCA into roughly 8 different ETFs and mutual funds per month for no charge — very handy for consolidating my non-Vanguard investments under a single umbrella.