E*Trade Assets Under Management (AUM)
One of the smaller firms in the mid-size category is E*Trade Financial, which incorporates both brokerage and banking activities. The company has 3,600 employees and 30 branch locations.
E*Trade has the following details:
| Assets under management |
$311 billion |
| Revenue from commissions |
$442 million |
| Number of brokerage accounts |
3.5 million |
| Average number of daily trades |
164,000 |
The average number of daily trades includes only those trades that are commissionable. From the $311 billion in deposits, the company earned $1.9 billion in gross revenue in 2016. This produced net income of $552 million. The E*Trade balance sheet shows a shareholders’ equity of over $6 billion.
Most of the firm’s revenue comes from interest income, including margin loans and segregated cash. This category made up 59% of E*Trade’s gross revenue in 2016. Second was commissions, amounting to 23%, and third was fees and service charges at 14%.
In 2016, the average commission paid to the broker was $10.70. However, E*Trade recently reduced its trading fee from $9.99 to $6.95 for most customers. Active traders will pay only $4.95. This change in pricing will undoubtedly affect the company’s bottom line going forward.
Margin balances at E*Trade have declined since 2014. In its most recent fiscal year, the broker’s clients had slightly more than $7 billion in margin balances.
E*Trade offers investment advisory services for a fee. These accounts add up to nearly $4 billion. The company department has steadily grown over time.
The broker’s self-directed department saw nearly a quarter of a million new accounts opened in 2016, a very positive sign.
E*Trade does not have a large international presence. The company is headquartered in New York. Its 30 brick-and-mortar offices are located in a handful of states, with California having eight.
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Comparison
E*Trade is one of the smaller firms in the brokerage industry. Its $311 billion client asset base is dwarfed by Fidelity’s $6 trillion. Vanguard manages $4 trillion, while Schwab has almost $3 trillion. TD Ameritrade, which isn’t considered a large firm, has more than twice as much as E*Trade.
Fidelity has over 24 million securities accounts open, far surpassing E*Trade on this metric. Fidelity’s clients also place over half a million trades per market day, beating E*Trade’s 164,000.
Merrill Lynch Wealth Management boats 1.8 million accounts, which is much smaller than E*Trade’s 3.5 million. Nevertheless, Merrill has more assets at $1.4 trillion. E*Trade tends to attract smaller individual investors, while Merrill caters to large institutions. Merrill also has 15,000 financial advisors, which exceeds E*Trade’s small staff.
Pros and Cons of a Mid-size Broker
E*Trade isn’t large enough to manage its own suite of mutual or exchange-traded funds. So it offers funds from other companies. Some investors may prefer a large enough broker that offers its own funds at a discount to its brokerage customers.
E*Trade is big enough to provide investment advice and portfolio management. A robo-advisory service starts at just 30 basis points.
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Overview of Individual Retirement Accounts at OptionsHouse by E*Trade
The platform is launched from the website and creates a separate window. It displays positions, account information, and market news in
article format. There are also windows for watchlists and working orders.
Trades for all securities, including mutual funds, can be submitted on the platform. Futures can also be traded on it. The software has an
excellent charting function. There are technical studies, drawing tools, and comparisons. The graph is very customizable, with different
cursors and display patterns available.
A mobile app can also be used free of charge. It has more limited charting than the desktop platform, but options trading, market news, and
watch lists are all available. A new OptionsHouse by E*Trade app has just been released. However, it has no information on funds transfer yet.
All three OptionsHouse by E*Trade platforms offer paper trading. This feature would be ideal for retirement savers who need some extra practice before
making their own trading decisions.
IRA Promotion
Opening a new IRA at OptionsHouse by E*Trade with at least $5,000 qualifies for 100 free trades. These freebies must be used within 60 days. They are
not valid for futures trading, however.
If you have an existing IRA at another broker, OptionsHouse by E*Trade will pay up to $100 to cover any ACAT fees the old firm charges to move the
account. Just call customer service and mention “$100 ACAT cash credit” to qualify for the rebate.
Comparison
With just four IRA types, OptionsHouse by E*Trade doesn’t offer a lot of variety. Investors who need a SIMPLE IRA will
have to go elsewhere.
OptionsHouse by E*Trade doesn’t offer financial advice, retirement planning, or portfolio management services. Pensioners who need some extra
assistance won’t find it here. Other brokers do offer these services for an additional cost. Ally Invest
and Fidelity are good examples.
While OptionsHouse by E*Trade's biggest flaw seems to be the lack of educational
materials for IRA account holders. Many other on-line discount brokers have large libraries of videos and articles for retirement
savers.
TD Ameritrade, and Merrill Edge both have many publications to help their clients do a better job of retirement planning.
These instructional materials are especially important for self-directed accounts.
Not having any IRA calculators is another failure. Vanguard has ten of them. Obviously, an OptionsHouse by E*Trade IRA should only be opened by pensioners who don’t need any guidance.
On the bullish side, OptionsHouse by E*Trade’s fee schedule is very generous. Not charging an annual account fee is an attractive policy,
especially for accounts that will be open for several years. Other brokers do have a yearly fee for IRA’s. TradeStation, for example,
charges $35. Edward Jones clients must pay $40 per annum, while Ally Invest is at $50. Ally Invest’s fee can be avoided with a $2,500
account balance.
Requiring no minimum opening deposit for an IRA is also appealing. Schwab, by comparison, requires a $1,000 deposit to open a retirement account, or a $100 monthly direct deposit. Other firms have no minimum requirement. These brokers include Firstrade and TD Ameritrade.
The $60 IRA closeout fee is above average by industry standards. Some brokers today charge nothing to close a retirement account. Vanguard and TD Ameritrade are two examples. Merrill Edge customers pay $49.95, while Firstrade assesses a $50 fee.
OptionsHouse by E*Trade’s $75 transfer-out fee is also a little steep. Schwab traders pay $50, while Vanguard assess no fee at all. Some brokers
charge more than OptionsHouse by E*Trade, however. WellsTrade customers, for example, must pay $95.
The $4.95 commission at OptionsHouse by E*Trade used to be very
low by industry standards. But now that Fidelity and Schwab have come down to the same price, OptionsHouse by E*Trade no
longer looks like a great value. In fact, with no account fees, lots of IRA tools, and $4.95 commissions, Schwab and
Fidelity have become excellent values.
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Summary
OptionsHouse by E*Trade has several strengths that IRA account holders can take advantage of. These primarily lie in super low pricing and trading
technology which makes it one of the best SEP IRA accounts in the industry today. The firm’s benefits, however, come at a cost as the broker struggles in other areas, especially mutual fund and ETF
offerings. Since funds are frequent investments in retirement accounts, choosing OptionsHouse by E*Trade doesn’t seem like an ideal choice.
TD Ameritrade, by comparison, offers a no-fee IRA with thousands of commission-free ETF’s and mutual funds.
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