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Author: secemad Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Scottrade for IRA - can't be that good? Date: 12/12/2004 2:44 PM
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Hi,

I am considering rolling my 401K into IRA in Scottrade. I visitted Scottrade website and read the posts here on it. It just seems unbelievable:

- low commission fee on stock trades
- mutual funds cost the same as if having an account with the fund family.

How is Scottrade making money? Same with freetrade.com? :)

Thanks!
ttt
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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43540 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/12/2004 2:52 PM
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Author: secemad | Date: 12/12/04 2:44 PM | Number: 43539
I am considering rolling my 401K into IRA in Scottrade. I visitted Scottrade website and read the posts here on it. It just seems unbelievable:
- low commission fee on stock trades
- mutual funds cost the same as if having an account with the fund family.
How is Scottrade making money? Same with freetrade.com?


Could it be hidden costs? Scott Burns wrote in the Dallas Morning News about something similar: http://www.dallasnews.com/business/scottburns/

excerpt:

A new study shows that mutual fund investors pay substantial expenses they don't even know about. In some instances these expenses are larger than the easily obtained "annual expense ratio" figure – so it is possible that some of your fund choices cost twice as much as you think....


Russ

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43541 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/12/2004 3:53 PM
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The most likely "other" costs are 12b-1 fees, which you can learn about on Morningstar.com. These are marketing fees that get deducted from the NAV of the fund daily and are used to incentivize sale of certain mutual funds. Either they get paid to your broker or your broker goes on a full paid trip to some resort to learn the selling points of their fund.

We recently learned about broker commission kickbacks. In return for doing business with a broker at full fees, the broker buys the mutual fund services like computer terminals, information services, or perks for key employees. Because trading costs are not reported to shareholders, this creates a slush fund, off the books, which can be used for anything. But Scottrade probably does not benefit. Its just that your mutual funds NAV gets penalized and return is reduced.

Ever since brokerage commissions have come unregulated, brokers have used commissioned business almost as a loss leader. They hope as you account grows that you will buy other services that generate income. They try to make their money on volume and by attracting large accounts. But by gaining your loyalty while you are a small fry, they hope to keep your trust for all your business.

People tend to be brand loyal. Once you are satisfied that a given supplier provide good service at a fair price, you might stay with them for the rest of your life.

This is a sophisticated kind of marketing. Relationship selling. (Its what computer companies like AOL and Microsoft do so badly.)

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Author: Lurker1999 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43542 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/12/2004 5:36 PM
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Please see this thread in the Scottrade forum regarding important changes in their fee structure:

http://boards.fool.com/Message.asp?mid=21737377

Bottom line, online purchases of mutual funds are about to cost $17 except for a list of 900 NTF funds. This list is shrinking from the current over 9000 they offer.

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Author: numbrel Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43543 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/12/2004 6:36 PM
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They hope as you account grows that you will buy other services that generate income. They try to make their money on volume and by attracting large accounts. But by gaining your loyalty while you are a small fry, they hope to keep your trust for all your business.

And this is where Scottrade has just lost some of my business, my husband's business and other family members' business.

Sometimes procrastination is a wonderful thing. I have been thinking about consolidating my husband's and my IRA accounts with Scottrade instead of spread out among mutual fund companies. I am now glad I have not done so. $17 is a BIG dent out of my investment for each contribution to an IRA and I certainly will avoid that. I have also urged family members to open IRA accounts at Scottrade, now I will be pushing in the direction of the mutual fund company.

When I am hit by a bus, DH will just have to muddle through the various accounts.

Barbara

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Author: SirTas Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43544 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/12/2004 7:08 PM
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I have been thinking about consolidating my husband's and my IRA accounts with Scottrade instead of spread out among mutual fund companies. I am now glad I have not done so. $17 is a BIG dent out of my investment for each contribution to an IRA and I certainly will avoid that. I have also urged family members to open IRA accounts at Scottrade, now I will be pushing in the direction of the mutual fund company.

I've heard the rumors about this, but I think it's based on a mistake.

From the Scottrade website:
In addition to our low commissions and no-fee IRAs, Scottrade offers you more than 9,000 no-transaction fee mutual funds online.
However, as of January 5, 2004, Scottrade will begin charging a $17 handling fee for no-load mutual fund orders placed directly with
your Scottrade broker. This fee will be charged in addition to any applicable fees charged by the fund. This handling fee is being
introduced to offset the expenses associated with processing no-load mutual fund orders through a broker and does not apply to
orders for load funds.

Scottrade will also continue to charge a $17 short-term redemption fee for the redemption of no-load, no-transaction fee shares
held less than 90 days (excluding Rydex, Potomac and Profunds' families of funds).

Thank you for your continued business, and remember that all mutual fund orders placed online will continue to have no transaction
fee.


So, it sounds from this that you can still do the online purchases without the $17 fee. It's the broker-assisted purchases that have the fee attached.

But there are lots of stories about Scottrade ... One I've heard is that Scottrade will have a $7 commission for limit orders as well as for market orders--but I couldn't find anything about that on their website.

--SirTas




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Author: PayingFool Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43545 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/12/2004 8:33 PM
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From the Scottrade website:
In addition to our low commissions and no-fee IRAs, Scottrade offers you more than 9,000 no-transaction fee mutual funds online.
However, as of January 5, 2004, Scottrade will begin charging a $17 handling fee for no-load mutual fund orders placed directly with
your Scottrade broker.


Look at the date. That's the letter from last year. According to what I've read on the Morningstar forum, Scottrade hasn't updated their website to mention the changes effective this coming January (01/03/2005) which include the $17 fee for online trades for the other 8100 funds.

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Author: numbrel Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43546 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/12/2004 8:47 PM
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SirTas,

I have been emailing Scottrade this weekend. There will be two groups of mutual funds, one will continue not having any fee unless you use a broker. The email I got said that this list would not be available until January, but there seems to be list on Morningstar.

Companies not on the above list will have the $17 transaction fee. My mutual funds are in Vanguard and T. Rowe Price and those two companies are not on the list on Morningstar. The fee will also apply to mutual funds held in IRA accounts.

And you are right, you can not find out anything by looking at their website. I suggest anyone even vaguely interested in this matter should email and ask for specifics. Even if you are not interested, email them anyway ;-) They really need to know they aren't handling this well.

Barbara

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Author: aktravler85 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43547 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/13/2004 2:50 PM
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I really think that some of you are jumping the gun.

It costs brokerages money to do business.

If you think that no company ever will change it's fee structure, you are just being naive.

It appears that the largest fund families will not incur the fees.

So where are you going to go that everything is free?

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Author: MurrayS Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43548 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/13/2004 5:32 PM
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So where are you going to go that everything is free?

Vanguard. Maybe not free, but as close to it as you're going to get.

-murray

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Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43549 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/13/2004 5:36 PM
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Vanguard. Maybe not free, but as close to it as you're going to get.

It depends on the individual situation :

"Vanguard charges a custodial fee of $10 a year for each IRA mutual fund account with a balance of less than $5,000. We automatically waive this fee if you have assets totaling $50,000 or more at Vanguard in any combination of accounts—IRAs, employer-sponsored retirement plans, brokerage accounts, and annuities."

rad



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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43555 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/14/2004 12:11 AM
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Companies not on the above list will have the $17 transaction fee. My mutual funds are in Vanguard and T. Rowe Price and those two companies are not on the list on Morningstar. The fee will also apply to mutual funds held in IRA accounts.

I just confirmed this with Scottrade- they will now be charging $17 for each Vanguard fund transaction.

Well I guess that answers the age old "Vanguard directly vs Vanguard through Scottrade" question!

Nick


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Author: MurrayS Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43558 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/14/2004 9:41 AM
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It depends on the individual situation :

"Vanguard charges a custodial fee of $10 a year for each IRA mutual fund account with a balance of less than $5,000."


IIRC, they also waive the fee for accounts with automatic monthly withdrawls. Either way, $10/year will be cheaper than Scottrade unless you have <$5000 in the account AND you only have a transaction every other year. Certainly possible, but I doubt very many individuals here are in that situation.

-murray

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43563 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/14/2004 11:52 AM
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This is a sophisticated kind of marketing. Relationship selling. (Its what computer companies like AOL and Microsoft do so badly.)

Thank you for recommending this post to our Best of feature.

That gave me my best laugh this week!

2old






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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43566 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/14/2004 4:11 PM
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<This is a sophisticated kind of marketing. Relationship selling. (Its what computer companies like AOL and Microsoft do so badly.)

Thank you for recommending this post to our Best of feature.

That gave me my best laugh this week!> 2old

I'm glad you enjoyed that, 2old.

In the chemical industry, people build large plants that are economical only because you can sell the product they make for 40 years or more. Most have a limited short list of customers. Hence, you treat those customers with a lot of respect--even if they buy from a competitor. You hope that one day the competitor will make a mistake and you will get your chance.

Computer companies seem to run on the philosophy that there are lots more customers where those came from. Hence you can pass out software that is loaded with bugs or takes control of your computer to such extent that you can't use it for anything else. Hence, you can get away with poor customer service, not fixing problems, charging credit cards without permission, etc, etc.

The US auto industry in the 1970s thought they did not have to worry about quality. People would buy whatever they shipped. Hence, Japan had an opening to exploit.

I see the computer industry making the same mistake. People will dump them just as soon as feasible for someone who does a better job of taking care of their customers. You know when your business is appreciated and when it is not. The customer be damned school of marketing does not lead to long term success.


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Author: MurrayS Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43567 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/14/2004 4:46 PM
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I see the computer industry making the same mistake. People will dump them just as soon as feasible for someone who does a better job of taking care of their customers

That's why I still own shares in Apple, I can't help but think more PC users will see the light someday.

-murray

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43568 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/14/2004 6:58 PM
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Computer companies seem to run on the philosophy that there are lots more customers where those came from.

Exactly! Reminds me of the expression "More wood!" (referring to employers who treat employees as wood--when they get burned out the solution is lay them off and get "More wood!")

Hence you can pass out software that is loaded with bugs or takes control of your computer to such extent that you can't use it for anything else. Hence, you can get away with poor customer service, not fixing problems, charging credit cards without permission, etc, etc.

Exactly the reason why so many in the corporate world on the server side are using Linux now. Most individual users are so comfortable with Windows now that they're averse to change.

I see the computer industry making the same mistake.

I don't think it's only the computer industry, altho they're the main offenders. If you ever had to call Cingular Wireless customer support you'd understand. I got an error trying to run a software I downloaded from their site. It took me several phone calls and over FOUR hours on the phone just to get someone who understood what I was talking about! And even then, she only understood because she had a computer background. She did manage to get it fixed, 3 days later. The irony was that this software was supposed to save me time by uploading my Outlook address book instead of re-entering it. I'm a pretty fast typist--I could have typed the whole darn thing in 4 hours!

People will dump them just as soon as feasible for someone who does a better job of taking care of their customers. You know when your business is appreciated and when it is not. The customer be damned school of marketing does not lead to long term success.

A few years back, I would have agreed with you, but it appears to me that (unfortunately) we're living in a different world now. The vast majority of companies just don't give a damn about their customers--after all, there's always 'More wood!'

2old





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Author: Matt1344 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43569 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/14/2004 7:22 PM
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"Exactly the reason why so many in the corporate world on the server side are using Linux now. Most individual users are so comfortable with Windows now that they're averse to change.

Hi 2old,

I did manage to switch to FireFox for my browser :-/

Regards, Ken

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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43574 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/15/2004 6:27 PM
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This information was recently posted on the "Vanguard Diehard's" Site as far as Scottrade's new list of funds they will be charging a transaction fee for and those they will not. Take it for what it is worth:

http://socialize.morningstar.com/NewSocialize/Asp/FullConv.asp?forumId=F100000015&convSeqNumber=38359&mrr=1103139600

Regards,
Bill

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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43643 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/18/2004 11:58 AM
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I did manage to switch to FireFox for my browser :-/

Good for you! I've heard lots of good things about FireFox, and Opera too!

2old


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Author: Matt1344 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 43648 of 74759
Subject: Re: Scottrade for IRA - can't be that good? Date: 12/18/2004 6:08 PM
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"Good for you! I've heard lots of good things about FireFox, and Opera too!

Hi 2old,

So far my only complaint with FF is the inability to open up the program from the previous session state after it's shut down. I did get directed to an extension for doing that called "SessionSaver" but for some unknown reason it won't download for me... Also FF doesn't have all the security issues of IE and last but not least...It's not a Microsoft product ;-) Also I enjoy the cool little add on for spell checking in web forms. So generally my posts don't have any misspelled words, now if it were only smart enough to recognize context. Oh yeah, another extension I want to download lets you set a timer in the toolbar.. I often jump on the computer in the middle of doing something else 'cause I've got to wait for something... well I have tendency to totally forget what I was doing. If it's during a cooking session I eventually get the "smell" warning but that's long after my food is inedible ;-/

I have Opera on my computer and haven't used it for some time.. I think one of the problems I had was an inability to click on links and certain things I needed to be able to do that just didn't work. Microsoft did what they could to foil Opera from working on web sites. Also there were some security issues similar to IE. I recall doing a test which proved that they had he same hole as IE. They may have fixed it, I haven't been back on to find out, probably because I have FF now.

Have a Merry Christmas,

Regards, Ken ("As Tim McGraw sings, "I hope you get the chance to live like you were dying.")

If you want a Spell Checker for InternetExplorer or Firefox to check MF posts or other web forms: IE => http://www.iespell.com or for Firefox => http://tinyurl.com/3pdwt

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