E*Trade, Please Follow Suit or BOA Might Have a New Customer

With companies like Zecco and now a big players like Bank of America offering no fee trading accounts, E*Trade better get on board asap or they're going to have one unhappy customer.

I switched all my banking from BOA to E*Trade about a year and a half ago and this new offer is almost tempting me to go back. I'll wait it out a month or so and see what happens since I really like E*Trade, but those $12.99 trades are looking pretty expensive these days!

Free Trade(s)

So I got an email from Zecco.com today saying that they have officially gone live with their new stock trading platform which is offering $0 commission on trades! I am a bit hesitant to transfer money to them because I was taught by my high school coach, "there is no free lunch". But these guys are backed by some serious players, so it's probably worth a try, and their business model actually does make a bit of sense: No advertising costs, make money on margin accounts, cash balances, etc.

This is an interesting move in the world of self-serve Internet trading because for many small investors, paying the usual ~$10 trading fee inhibits you from making small trades just for fun. Not that you should trade just for fun, but part of investing in stocks is the fun factor, the excitement of watching a stock tick up and up... or the dread when it does the reverse. But that is just human nature, taking risks is built into our brains. Now say you just wanted to put $1000 into some stock, at $10 per trade, you will spend $20 in commissions (one for buy, one for sell), that's 2% of your money gone right off the bat! Now that is NOT fun. What if you just wanted to put $500 in, that's 4% gone, so now you're stock has to have an extra 4% gain just to break even.

Zecco really has the chance to change the industry and the potential to do very well, essentially tapping into the long tail of the stock trading industry. Unless of course everyone else follows suit and starts offering free trades, then Zecco might be in trouble.

If I Were a VC

I'd invest in Freshbooks. They are onto something big. I started using them this week to track my time and sent out a few invoices. Very, very impressed. Although it's not a full featured accounting package yet (no way to track bills or help with my taxes), it's great for its main purpose of sending invoices and tracking payments.

And it's not just the product, it's their marketing machine too. Check out the first page of their website, testimonials out the ying yang. It actually makes you want try it out just hearing hearing all these happy customers. A blog that actually has some good content, not just marketing crap. An active forum where employees are also active. Customizable pricing. Great, happy feeling look and feel (who wouldn't be happy seeing bright blue with a green leaf?). And they're Canadian... ok, maybe that's not a reason to invest, but I'm a bit biased.

While Intuit and Microsoft are still competing on the desktop, these new Web 2.0 companies are coming up and making a real difference. Intuit does have Quickbooks Online Edition, but it just feels like Quickbooks, so unexciting, so not fresh (no pun intended), and it doesn't have cool things like accepting Paypal payments.  Blinksale is another site that does invoicing, but they have a ways to go to catch up.

Who knows where these companies will end up, but if I were a VC, I'd put some money into FreshBooks.